Frustrated by the lack of transparency surrounding the Solatium Fund, also known as the compensation kitty, civil society organisations (CSOs) are considering involving the Ethics and Anti-Corruption Commission (EACC) and the Kenya Revenue Authority (KRA) to investigate its value. The fund, currently managed by the Ministry of Health, was established on 1 July 1989. However, for years, no government official has disclosed its balance, despite the increasing number of Kenyans suffering from the harmful effects of tobacco use
Civil society organisations (CSOs) pushing for higher tobacco taxes are pressing the government to disclose the amount held in the compensation fund for those affected by tobacco products. This follows a recent report exposing discrepancies in tax returns submitted to the Kenya Revenue Authority (KRA) by British American Tobacco (BAT).
Frustrated by the lack of transparency surrounding the Solatium Fund, also referred to as the compensation kitty, the CSOs are contemplating approaching the Ethics and Anti-Corruption Commission (EACC), alongside the KRA, to probe the fund’s value.
The Solatium Fund, managed by the Ministry of Health, was established on 1 July 1989. Yet, for years, no government official has revealed its balance, despite the rising number of Kenyans suffering from the harmful effects of tobacco use.
Also Read: New Study Suggests BAT Kenya May Have Evaded Up To Ksh 9.6 Billion In Taxes
The Tobacco Control Act 2007, which took effect on 1 January 2007, includes provisions relating to the Solatium Fund, mandating tobacco manufacturers and importers to contribute to it as compensation.
During a round-table discussion with journalists last week, Irene Otieno, National Coordinator for the National Taxpayers Association (NTA), called on both BAT Kenya and the KRA to show complete transparency in this matter.
“NTA strongly urges the KRA to carry out a thorough investigation to ensure Kenya does not lose vital revenue through Illicit Financial Flows (IFFs) and tax evasion,” Otieno said, insisting that corporate entities must be held accountable for their tax duties, as lost revenue directly impacts public services and national development.
The NTA, together with key stakeholders, has demanded accountability following reports of a potential $28 million (Ksh 3.6 billion) tax discrepancy involving BAT Kenya for the 2017/2018 fiscal year.
An investigative report, published by the University of Bath’s Tobacco Control Research Group in collaboration with The Investigative Desk, Tax Justice Network Africa (TJNA), and The Weekly Vision, uncovered significant inconsistencies in BAT’s revenue statements. This has raised concerns about tax evasion and IFFs linked to BAT Kenya.
John Thomi, Chief Executive Officer of TJNA, pointed out that the investigation revealed BAT Kenya failed to report $94 million (Ksh 12 billion) in cigarette sales, resulting in a Ksh 3.6 billion tax revenue loss between 2016 and 2021.
“The analysis points to deliberate tax evasion, particularly between 2017 and 2018. This sum matches the budget for transformer installations across Kenya during the 2017/2018 fiscal year,” Thomi noted.
Under the Tobacco Control Act, the Ministry of Health introduced regulations requiring tobacco companies to contribute 2% of the value of manufactured or imported tobacco products to fund tobacco control research, cessation, and rehabilitation programmes. BAT contested these rules on various grounds, but the Supreme Court dismissed their challenge.
Rachel Kitonyo-Devotsu, Senior Tobacco Advisor for the Tobacco Control Data Initiative (TCDI), has called for a forensic audit, arguing that BAT cannot be trusted in light of the report’s findings.
“This report suggests deceit, and once we confirm the discrepancies, we must also audit the Tobacco Control Fund and the amounts paid into it,” she said, noting that the Tobacco Control Fund draws much of its funding from a 2.75% contribution on BAT profits.
“If Ksh 3.6 billion was not declared, then 2.75% of that should have gone into the Tobacco Control Fund,” she explained, adding that transparency around the Solatium Fund is equally essential.
“We’ve been asking questions for years, but we still don’t know how much money has gone into this fund or how it’s been allocated. We need to establish whether BAT has paid its due share for 2017, 2018, and beyond,” she concluded.
Celine Awuor, Chief Executive Officer of the International Institute for Legislative Affairs (IILA), urged the Ministry of Health to ensure that, following the forensic audit, a further audit of the fund is conducted to claim 2.75% of the Ksh 3.6 billion.
“We want our 2.75% of what BAT has misappropriated,” Awuor insisted, adding that the funds could support cancer patients and tobacco cessation efforts in the country.
This exposé comes amid growing discontent with Kenya’s rising tax burden, as individual taxpayers voice concerns over the increasing cost of living. In response, BAT Kenya has firmly rejected the allegations, asserting that the report rests on flawed assumptions and misrepresentations of the company’s operations. BAT maintains it adheres to all relevant financial disclosure regulations and international reporting standards. The KRA has acknowledged the gravity of the allegations and committed to a comprehensive review of the findings
