Two Chinese linked companies are under probe over claims of tax evasion involving importation of cigarettes.
They are said to have imported dozens of cartons of cigarettes and avoided paying taxes.
Both the Kenya Revenue Authority and Directorate of Criminal Investigations are investigating how Shapo Trading Limited and Yulees Blooms Company imported for sale the cigarettes in Kenya without an Electronic Tax Register (ETR).
Officials said they are working on intelligence reports that the Chinese companies brought cigarettes into Kenya without paying taxes and the packets of cigarettes do not have excise duty stamps on them.
“The teams are searching for about 200 cartons that are missing from the company warehouses in the city. This is part of the probe into the claims,” said an official aware of the probe.
Other officials said the importers had smuggled about 40 cartons to a neighboring countries for sale.
The intelligence shows some government officials could be abetting the smuggling and evasion.
“We will know more soon. A team is on the ground to establish all that,” added the source.
This is because of among others the practice is killing the local tobacco industry.
“This also affects the plight of the farmers,” added the officials.
There was no immediate comment from the companies domiciled in Kilimani area and Mombasa Road.
An official said they are law abiding citizens.
Chinese are heavy consumers of cigarettes and they import their brands for both consumption and selling.
The move is said to have denied the country of taxes running to millions of shillings.
This comes in the wake of reports KRA registered a revenue shortfall in October, with notable declines in domestic VAT, PAYE, and Excise Duty collections.
Import Duty, VAT, and the Import Declaration Fee (IDF) fell short by Sh2.9 billion, driven by a reduction in non-oil imports and the impact of increased tax cuts.
Excise Duty on money transfers declined by Sh728 million, affected by lower transaction values within the banking sector.
Domestic Excise Duty decreased by Sh573 million, reflecting reduced production in bottled water, beer, and tobacco.
PAYE remittances were down by Sh1.2 billion, as large taxpayers offset liabilities using tax refunds while Domestic VAT saw a 26.3% decline, leading to a deficit of Sh2.3 billion.