Kaluworks Limited, a Kenyan manufacturing firm linked to 93-year-old Kenyan businessman Manu Chandaria, has lost a tax dispute worth Ksh730 million ($5.33 million) after its case was dismissed by the High Court.
The company, which produces aluminum cookware and roofing sheets, was ordered to pay Ksh839.7 million ($6.14 million) in taxes back in September 2018, but had appealed against the decision, claiming that the tribunal misinterpreted the Tax Procedures Act (TPA) and that tax legislation should favor the taxpayer in cases of ambiguity.
Justice Alfred Mabeya threw out the appeal, stating that the company had failed to comply with section 52(2) TPA, which requires a taxpayer to remit undisputed taxes before challenging the Kenya Revenue Authority’s tax assessment.
The judge also stated that the company had admitted to owing Ksh24 million ($52,100) in VAT, and was therefore bound to pay the taxes before taking any further steps to challenge the demand.
The recent ruling stated that Kaluworks had not followed TPA provisions and that it still had to pay the demanded amounts for corporate tax and VAT, but less for customs duty and import VAT.
The ruling is a significant setback for the company, which employs more than 30,000 people in 45 countries and produces steel, polymers, and aluminum goods from its sites in 16 African countries.
Kaluworks operates as one of the operating subsidiaries of Manu Chandaria’s Comcraft Group, which recently regained control of the company from NCBA Group and Co-operative Bank Group (Co-op Bank) after the Kenyan lenders dropped their pursuit of a Ksh6.6-billion ($55 million) debt.
Chandaria’s group, Comcraft, has also pledged to inject Ksh150 million ($1.25 million) into the business to revitalize its operations, while NCBA will receive Ksh580 million ($4.8 million) and Co-op Bank will receive Ksh628.4 million ($5.23 million).
The ruling is expected to have a significant impact on the company’s operations, which have already been affected by the COVID-19 pandemic.
The company has struggled to remain profitable in recent years due to increased competition from cheaper imports and rising production costs.
Its management team has been working to reduce costs and increase efficiency in its operations, but the recent ruling is expected to have a significant impact on the company’s bottom line.