In hindsight, Mr Njiraini may just have had Roche Kenya Ltd in mind. The firm seems to have perfected the art of tax evasion, taking it to a much higher level as the evidence in our possession suggests.
In 2013, former Kenya Revenue Authority commissioner-general
John Njiraini warned local audit firms of their role in helping multinational
firms evade paying billions of shillings in taxes. Kenya played host to an
international tax seminar, where the CG also mentioned that the authority had
recovered Sh4 billion since 2007 in unpaid taxes following an audit carried out
on 40 multinationals.
The reality is that Roche Kenya Ltd subsidiary, Roche Diagnostics handles the bulk of the Kenya
businesses, they are the main suppliers of machines like Cobas 8800, Cobas
TaqMan, Cobas Integra and many others to Kenya government agencies among them
Kenya Medical Supplies Agency (KEMSA), KEMRI, Kenyatta National Hospital among
many other institutions in both public and the private sector. Of interest here
is that once services are provided locally the billing and invoicing, on the
other hand, is done by Roche Diagnostics South Africa who are then paid
directly. How this illegal practice has been allowed to go on for long by the
Kenyan tax authorities without being flagged remains a mystery.
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| Frank Loeffler, Country Manager Roche Kenya Limited. |
In hindsight, Mr Njiraini may just have had Roche Kenya Ltd
in mind. The firm seems to have perfected the art of tax evasion, taking it to
a much higher level as the evidence in our possession suggests.
We have in the past few weeks been looking at how Roche Kenya
Ltd with the assistance of known audit and law firms managed to operate
parallel businesses through their subsidiaries, crafting a clever tax avoidance
system in the process.
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| Roche Diagnostics invoice to KEMSA |
Roche Diagnostics and Roche Diabetes both operate under the
wings of Roche Kenya Ltd which is registered in the country under a certificate
of incorporation number CPR/2013/92150, however, the two subsidiaries transact
businesses independently, although Frank Loeffler, Country Manager of Roche
Kenya denies the independence of the subsidiaries, which is perfectly
understandable as a contrary opinion would put him and the Roche Kenya in
serious conflict with KRA.
 |
| Sandra Orta. General Manager, Roche Diagnostics South Africa. |
Most foreign pharmaceutical companies who supply diagnostic
machines, pharmaceutical products or even medical equipment’s with a presence
in Kenya, very rarely manufacture any product here, instead, some like Roche
Pharmaceuticals Kenya has maintained a strong presence with a complex
management structure put in place that in some instances is designed in helping
to avoid tax remittance to the Kenya Revenue Authority.
The Weekly Vision online contacted Mr Frank Loeffler through
emails for his response, he responded with the following statement.
Roche Kenya Limited is the only active legal entity of Roche
in Kenya. All employees, regardless of which part of our business they work,
are employed by Roche Kenya Ltd. Income tax and other social security for all
employees are declared and paid to the Kenyan government. Equally, all value
creations and profits generated by Roche Kenya Ltd are declared locally and
profit taxes are paid to KRA. The books of the company are audited every year
by external auditors and by KRA.
Regarding the international trade, we would like to reiterate
that some customers are purchasing Roche products and services from Roche
entities abroad. This is the case for products and services which cannot be
offered by Roche Kenya Ltd. In those cases, the invoicing currency is part of
the contractual agreement with the purchasing entity and follows all trade
regulations. Accordingly, all goods are declared at the port of entry and taxes
are paid to KRA. This applies as well about analyzers under placement for viral
load testing, these are part of the USAID/PEPFAR funded program for HIV/AIDS.
The Kenyan public may ask why Roche Kenya Ltd operates
parallel businesses through “International” Roche subsidiaries like Roche
Diagnostics and Roche Diabetes if as Mr Loeffler claims, they have a legal
entity in Kenya? The answer is that this is a conduit for tax evasion since
payments by Kenyan health and research institutions are made directly to Roche
in South Africa and not Kenya? Once payment is remitted to South Africa, there
is no way Roche Kenya can remit Sales and Corporate taxes to KRA.
We pose the following questions in rebuttal to Frank
Loeffler’ response that the Kenya Revenue Authority may find interesting to
look into.
- ·
There
is a local Roche Diagnostics distributor in Kenya by the name of Sciencescope
Limited. How come it's not the distributor importing? instead of these
customers buying from South Africa, Roche should bring in their products
through their licensed distributor.
- · Who declares the income from assets held locally? Roche Diagnostics owns assets mainly diagnostic machines that are leased out to medical and research institutions like KEMRI and Kenyatta National hospital to name just a few. These machines are maintained and serviced by Roche Diagnostics appointed distributor like Sciencescope under an arrangement they call ‘’Service Level Agreement’’ where Sciencescope bills Roche (South Africa) who then settle the invoices in foreign currency mostly Euros and US dollars. Additionally, why is it that other multinational diagnostics companies like General Electric and Abbott maintain a local legal office doing all that?
- · Why does Roche Kenya have diagnostics employees if indeed diagnostics business is all international? Shouldn’t all these employees be working under Roche products Pty South Africa? What diagnostics products are sold by Roche Kenya?
·
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| Roche Diagnostics Kenya seeking to recruit, Frank Loeffler claims otherwise. |
- · The LinkedIn adverts clearly stated that Roche Diagnostics Kenya is seeking to recruit for several roles key among them are commercial roles (Regional Manager and Finance partner). Isn’t that acknowledging that Roche Diagnostics Kenya exists as an independent hiring entity? What finances or sales opportunities are these employees going to pursue if all the diagnostics business is international as Mr Loffler claims in his response?
- · Frank Loeffler also talks of products that cannot be offered in Kenya. Roche DOES NOT manufacture any products in Kenya. All Roche products found within the Kenyan market are imported. So why can’t Roche Kenya import the products that are being sold to Kenyan clients directly by Roche South Africa? Rather why is it that Roche Kenya is not able to offer these customers the full range of products to a point where these customers are buying from Roche South Africa? What is stopping Roche Kenya from selling to KEMSA? Roche does not manufacture anything in South Africa, just like Kenya Roche products in the South African country are imported from Europe.
- · The truth of the matter is 70% of diagnostics business is between Kenyan clients and Roche South Africa. The other 30% is being done via the local Roche Diagnostics distributor. So, what is the Role of Roche Kenya in the Roche diagnostics dealings in Kenya if not aiding and facilitating tax evasion?
According to a 2015 report released by an international
charity firm Oxfam, pharmaceutical companies are said to have avoided paying
taxes to the tune of 215 million dollars just in Australia alone. The report
titled Prescription for Poverty examined the tax practices of four of the
world’s largest pharmaceutical companies: Johnson & Johnson, Pfizer, Merck
Sharp & Dohme (MSD Australia) One may add Roche Kenya Ltd to the list as
well
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