The Kenya Revenue Authority, has launched an investigation into a $12.5 million tax claim against the Mukuha family, who are the heirs of the late retail magnate Peter Mukuha Kago.
Peter Mukuha Kago was renowned as the visionary behind Naivas International, which is Kenya’s largest retail chain.
The KRA’s demand for taxes is linked to a 31.5-percent stake sale in Naivas International that took place in 2020 by members of the Mukuha family. The tax authority alleges that the family structured the transaction through Mauritius in an attempt to evade taxes in Kenya. As a result, the KRA has taken the matter to the tax tribunal.
Official statements from the KRA state that the family’s investment entity, Gakiwawa Family Investments, received Ksh 5.2 billion ($36.2 million) from the deal that was orchestrated in Mauritius to avoid tax liabilities in Kenya. Despite their appeal being dismissed by the Tax Appeals Tribunal, the KRA remains determined to pursue the Ksh1.79 billion ($12.5 billion) in corporation tax, along with associated penalties and accrued interest.
In the midst of this investigation, the Mukuha family is preparing to sell an additional 11-percent stake in Naivas International for an estimated $41.7 million. This impending transaction would mark the family’s third partial divestment from Naivas and would result in their ownership interest decreasing from the current 60 percent to 49 percent, effectively making them minority stakeholders.
The issue at hand raises questions regarding tax evasion and the responsibility of individuals and corporations to meet their tax obligations. The KRA’s allegations suggest that the Mukuha family intentionally structured the transaction in a way that allowed them to avoid paying taxes in Kenya. If proven true, this would be a clear violation of tax laws and could have serious consequences for the family.
Furthermore, this investigation highlights the importance of transparency and accountability in financial transactions. By conducting business through offshore entities and foreign jurisdictions, individuals and corporations can exploit legal loopholes to minimise their tax liabilities. This not only deprives governments of much-needed revenue but also perpetuates inequalities within societies.
The current valuation of Naivas International is positioned at $379 million, which aligns with the $41.7-million offer made for an 11-percent stake. This divestment decision comes at a time when the company has experienced increased profitability and market growth, following the initial sale of a 31.5-percent stake by the family in 2020.
During that previous transaction, a consortium of the International Finance Corporation (IFC), German fund DEG, and private equity firms Amethis and MCB Equity Fund acquired the shares for a total of $61.5 million.
The resulting proceeds from that sale were reinvested strategically to fuel the expansion efforts of Naivas International across the nation.
