COMPLIANCE

336 water, beverage companies risk closure on new excise stamps

Only 64 companies out of more than 400 have automated production lines that can support the fixing of excise stamps.

In Summary

•KRA expects to collect an additional Sh4billion from the Excise Goods Management System (EGMS).

•The Kenya Association of Manufacturers (KAM) has supported the EGMS saying it is meant to address the issue of counterfeits in the sector.

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

Over 336 companies dealing with water, juices and non-alcoholic drinks face closure as Kenya Revenue Authority (KRA) moves to implement the second phase of the Excise Goods Management System (EGMS).

KRA will from Wednesday November 13, rollout EGMS on bottled water, juices, energy drinks, soda and other non-alcoholic beverages.

Yesterday, the taxman said only 64 have automated lines that can support the fixing of the excise stamps, despite more than 400 companies being in business.

“Once we roll out this, if they are not complying, definitely their products cannot be in the market and if their products are not in the market they will either opt to comply or fall out. But it is my prayer they comply so that we facilitate them,” KRA commissioner for domestic taxes Elizabeth Meyo said during a press conference at Times Tower, Nairobi, yesterday.

Some of these companies, according to KRA, are set up in people’s homes.

 “We have very many people dealing in water and juices. You find that even in a servant quarters someone has come up with a production line,” Meyo noted.

The second phase comes after the successful implementation of the EGMS system on alcoholic drinks and cigarettes in 2013, which helped increase excise tax from Sh700 million to the current Sh5.6 billion.

Meyo yesterday said the latest development will enhance compliance, address illicit trade and boost revenue collection by approximately Ksh4billion. This means the taxman could collect in excess of Sh9.6 billion in excise tax.

“We have engaged our stakeholders,” she noted, which include manufacturers and business associations.

The move however exposes consumers to exploitation by traders as they move to pass the additional cost of doing business.

The Consumers Federation of Kenya (Cofek) yesterday warned it will escalate the cost of living.

“This spells a bad Christmas. Kenyans should be ready for a dull Christmas because majority of the people consume these products,” Cofek secretary-general Stephen Mutoro told the Star on phone, “We are consulting to see how to deal with it.”

KRA has however warned traders against exaggerating prices, as the stamps only cost between Sh0.5 and Sh0.6, which is a review from the previously proposed Sh1.5  per stamp for bottled water and Sh1.50 per stamp for soda, juice and other non-alcoholic beverages.

“It cannot go up more than Sh6. We have our team on the ground which will move from each and every supermarket, from each and every player in this field to ensure Kenyans are not robbed by unnecessary increase in prices,” Meyo said.

The Water Bottlers Association of Kenya (WBAK) yesterday said a good number of its members are ready for the roll-out.

However, Chairman Henry Kabogo said its members are being frustrated by officers at the National Environment Management Authority when seeking clearance.

“Some are asked how they are going to collect wrappers. This is so funny. But generally we are ready,” Kabogo said.

The Kenya Association of Manufacturers (KAM) has supported the EGMS saying it is meant to address the issue of counterfeits in the sector.

“We hope that by it going live, it will achieve this in order to protect the health of our citizens and provide a level playing field for local industries,” KAM chief executive Phyllis Wakiaga said.

“We have in the past raised concerns on the expected cost from the System and we will continue to engage the government to find a solution to this so that the System’s aim of increasing competitiveness of local manufacturing is met,” she added.

KRA notes that the system, which covers all locally and imported products, will create a “fair playing ground.”