Nakumatt audit reveals Sh1.8 billion tax debt

Workers protest over pay outside Nakumatt branch in Eldoret town. FILE PHOTO | NMF 

By MUGAMBI MUTEGI

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Summary

• Peter Kahi, the supermarket’s court-appointed administrator, told the company’s creditors that the KRA debt is part of the Sh35.8 billion that Nakumatt owes.
• Mr Kahi wants the taxman to allow the retail chain to pay the debt in six staggered and annual instalments beginning February 2021 and to clear the outstanding amount by February 2026.
• The KRA will be paid five equal instalments of Sh300 million in the first five years and a final payout of Sh318 million.

Troubled retail chain Nakumatt owes the Kenya Revenue Authority (KRA) Sh1.8 billion in unpaid taxes, according to an audit of the retailer’s accounts.

Peter Kahi, the supermarket’s court-appointed administrator, told the company’s creditors that the KRA debt is part of the Sh35.8 billion that Nakumatt owes.

Mr Kahi wants the taxman to allow the retail chain to pay the debt in six staggered and annual instalments beginning February 2021 and to clear the outstanding amount by February 2026.

The KRA, which is struggling to meet its revenue targets, will be paid five equal instalments of Sh300 million in the first five years and a final payout of Sh318 million.

“KRA would ordinarily levy penalties and interest on amounts due to them, their liability is also restructured to taxes due in the past one year prior to appointment of a liquidator,” the administrator’s report says.

Nakumatt also owes several banks Sh6.9 billion, while commercial paper and short-term note holders have a Sh4.8 billion claim against the retail chain.

Nakumatt is further indebted to unnamed entities to the tune of Sh1.14 billion in the form of private placement loans.

The supermarket’s employees, who have halved to 3,000 in the wake of successive branch closures, are owed Sh1.4 billion while trade and other creditors are seeking to be paid Sh19.7 billion.

This huge mountain of debt and unchecked expansion using cash flows, lower sales, fraud and mismanagement have seen Nakumatt suffer the wrath taxmen across the region.

READ: Audit reveals Nakumatt suffered Sh18bn fraud

In Uganda, where the business is also under administration, the Uganda Revenue Authority (URA) last September sold Nakumatt’s goods seeking to recover Sh7.24 million ($71,000).

The auction came a month after the Ugandan taxman took over Nakumatt’s operations in the country and gave itself first priority on all income.

The KRA last October published a notice signalling its intention to auction Nakumatt’s property that had arrived by air at Jomo Kenyatta International Airport in Nairobi over unpaid taxes.

The goods facing the auctioneer’s hammer were five consignments of Clarks footwear and handbags.

Nakumatt’s run-in with the KRA is, however, not limited to the Sh1.8 billion tax claim.

Mr Kahi has hired experts to conduct a “special audit” of a significant discrepancy in Nakumatt’s books of accounts where stock worth Sh18 billion is booked as an adjustment in its accounts for the year to December 2017.

READ: Nakumatt in fresh row with several landlords

Nakumatt’s former management has said the discrepancy was the result of massive “theft, pilferage, stock shrinkage and losses arising from stock obsolescence”, a response Mr Kahi says is “unsatisfactory.”

The administrator is hopeful that the fresh stock audit will help the business secure a partial “tax write-off” from the KRA and afford it headroom to map out a recovery path.

“The explanations are clearly unsatisfactory and raise more questions than answers, if we’re to claim this expenditure for tax purposes,” the administrator’s report says.

“KRA will need a very clear and transparent response as to the make-up and nature of these losses.”