TAX BURDEN

Bottled water and juice prices to rise as excise duty stamp rule takes effect

Questions however aboud as to why the amount collected should go directly to the system's vendor and not KRA.

In Summary
  • KRA announced that the products must be affixed with excise duty stamps starting November 13, when the EGMS goes live
  • The EGMS was designed to protect KRA from tax loss as well as protect consumers from counterfeit liquor and tobacco that have proliferated the market
KRA officials display some of the mineral water which they confiscated during the raid to crack down water companies which evade tax in Mombasa on march 13,2014./FILE
KRA officials display some of the mineral water which they confiscated during the raid to crack down water companies which evade tax in Mombasa on march 13,2014./FILE

Bottled water, juice and other non-alcoholic beverages consumers in Kenya will pay Sh1.50 more from November 11.

Interestingly, the amount will go directly to a Switzerland based excise stamp technology provider,SICPA and  not the Kenya Revenue Authority (KRA).

The firm was controversially awarded the Excisable Goods Management System (EGMS) tender by the KRA in 2013 at a  cost of Sh17 billion, which it will recover directly from manufacturers.

 
 
 

On Monday, KRA announced that the products must be affixed with excise duty stamps starting November 13, when the EGMS goes live.

 
 

Yesterday, Activist Okiya Omtatah described the implementation of the excise stamp on the products as government's punishment to consumers to profit a foreign entity.

Speaking to the Star on phone, the activist who successfully opposed the tax in High Court last year before the ruling was overturned by the Court of Appeal said the single sourcing of the firm for the tender was suspect and against the law.

''The EGMS will only benefit SICPA and its agents who are going to recover the cost at hand. It is oppressive and duplicates roles done by Kenya Bureau of Standards (Kebs),'' Omtatah said.

His views are supported by the National Assembly’s Public Investment Committee (PIC) inquiry report dated April, which found out the tender was overpriced with the burden pushed to manufacturers who in turn pass the costs to consumers.

The EGMS was designed to protect KRA from tax loss as well as protect consumers from counterfeit liquor and tobacco that have proliferated the market.

The system’s design features tracking of products by incorporation into the production chain of manufacturers as well as authentication features verifiable by consumers.

 
 
 

By use of excise stamps, the system fitted in the production chain allows KRA to track how much alcohol each liquor firm produces.

 
 

The stamps are applied and activated on products during production and the information relayed to KRA.

The revenue collector is however vague on estimated revenue the system is likely to fetch, only indicating that it will improve collection from affected products by 12 to 14 per cent.

Last month, the Water Bottlers Association of Kenya (WBAK) said the implementation will see retail prices for bottled water prices skyrocket, further cutting access to clean water by consumers. 

Currently, a 20-litre bottle of water is estimated to cost between Sh250 and Ksh350, but upon implementation of the system, the retail price will shoot to between Sh450 and Sh550, for a refill,'' the association said. 

He added that besides the cost impact on the poor, EGMS architecture is purely designed to benefit a few offshore interests as opposed to collecting tax revenues to benefit the country.

Another entity that has opposed  system is  the Kenya Association of Manufacturers (KAM).

In July, the association's chairman Sachen Gudka said the cost attached to EGMS range from Sh0.50 to Sh 2.80 per unit, which are high for all manufacturers and untenable for small industries.

''This will impact negatively on the competitiveness of industry. Further, manufacturers do not have any control on possible increment on the excise stamp duty in future', Gudka said.