Lobby calls for crackdown as fake stamps rock market

Says EGMS contract to swiss firm-SICPA should not have been awarded.

In Summary

•Last week, a section of manufacturers mainly in the non-alcoholic drinks segment warned the Kenyan market is flooded with fake excise stamps.

•KRA singed a Sh17 billion deal with the Swiss firm to provide traceable excise stamps which would help curb tax cheats.

Fake excise stamps previously intercepted at the JKIA/
FAKE STAMPS: Fake excise stamps previously intercepted at the JKIA/

There is need for a major crackdown on businesses dealing with fake excise stamps, Stop Crime Kenya (StoCK) has said.

StoCK which has a secretariat at the Consumers Federation of Kenya (Cofek) is campaigning against criminals who are making a fortune smuggling and selling illicit goods.

“Illicit trade costs Kenyans an estimated Sh153 billion a year in lost taxes and robs the state of resources needed for vital services. It also funds other criminal enterprises, breeds corruption and finances extremism across the region,” StoCK chairman and Cofek secretary general Stephen Mutoro said in a statement yesterday.

His sentiments come in the wake of increased excise stamp in the market even even as Swiss company–SICPA mints billions from its Kenyan contract on the Excisable Goods Management System (“EGMS”).

Last week, a section of manufacturers mainly in the non-alcoholic drinks segment warned that the Kenyan market is flooded with fake excise stamps.

Kenya Revenue Authority (KRA) signed a Sh17 billion deal with  SICPA to provide traceable excise stamps affixed on alcoholic drinks and cigarettes, a protested contract that initially commenced on April 18, 2013.

This was later extended to non-alcoholic drinks including juices and water, with the taxman counting on EGMS to curb tax cheats.

SICPA's five year contract however hangs in the balance after hitting its time in February this year.

According to StoCK, the excise stamp crisis is compounded by a legal tussle between KRA and SICPA, which holds a multi-billion-shilling contract to run “the controversial Excisable Goods Management System (EGMS) that uses the stamps.”

“The fake excise stamps and KRA’s dispute with SICPA can only fuel Kenya’s insidious illicit economy,”said Mutoro.

KRA has however remained mum on the fakes and the SISCPA contract citing an active court case.

“The matter herein is before the Court and any discussion of the same might jeopardize the legal process. KRA will therefore wish to keep off the discussions revolving around the matter until the Court process is complete,” the taxman told the Star.

A recent study by the Anti-Counterfeit Authority(ACA), conducted between October 2019 and February 2020, indicates that illicit trade denied Kenya Sh103 billion in revenue in 2018. This was up from KSh101.23 billion in 2017.

The amount is projected to have gone higher in recent times, scaled by failing systems which have paved way for increased illicit trade.

“Kenya simply can’t afford such losses, especially when we are having to borrow heavily to fill budget revenue gaps, combat the Covid-19 pandemic and build a better future for the citizens,” Mutoro noted.

He said a comprehensive review of the discredited excise stamp system is urgently needed to enforce compliance, boost the economy and protect consumers.

Manufacturers of excisable goods have been paying SICPA Sh1.50 for every stamp attached to each item, earning the Swiss firm billions of shillings annually.

“As we have urged before, this contract should not have been allowed in the first place. It benefits the monopolistic contractor with severe accountability challenges,” Mutoro said.

The Kenya Association of Manufacturers (KAM) has noted existence of fake excise stamps and said it was working with KRA, among other agencies, to “curtail circulation of the same in the market, as part of a Multi-Agency Team against illicit trade.

“Trade in illicit goods, substandard and counterfeit products is a major challenge facing manufacturers, and the country at large,” CEO Phyllis Wakiaga noted.

The main driver of illicit trade, according to KAM, is the need for quick money which unscrupulous traders ride on, by circumventing procedures needed for product development.

“This causes unfair competition in the market for the genuine manufacturers, in addition to shrinking their already existing market share,” Wakiaga said.

According to KAM, the other driver of illicit trade is lack of awareness by consumers and low purchasing power of consumers as they opt for cheap alternatives.

WATCH: The latest videos from the Star