•This is part of its strategy to continuously review and improve the security features of excise stamps to deter counterfeiting.
•The excisable products covered include alcoholic beverages, tobacco and tobacco products, water, soft drinks and juices.
Kenya loses more than Sh153 billion tax revenue annually to illicit trade, according to the Anti-Counterfeits Authority(ACA), with tobacco and alcohol products among the most traded.
This, even as consumers in the country remain reluctant in reporting illicit trade.
According to a recent survey by Stop Crime Kenya (StoCK), four out of 10 consumers in Kenya see no point in reporting illicit trade, with a third of consumers continuing to buy counterfeit goods knowingly.
StoCK is a platform campaigning against criminals who make a fortune smuggling and selling illicit goods. It has a secretariat at the Consumers Federation of Kenya (Cofek).
The survey was conducted by researchers from Cofek through telephone interviews with 100 consumers in 24 counties, each.
Majority of the surveyed noted that even though there are agencies to which one can report illicit trade, there are significant barriers preventing them from doing so, with one in four people saying they fear retaliation if they report illicit trade.
Kenya has one of the largest markets for fake goods and contraband in East Africa according to ACA, ranging from alcohol, electronics and pharmaceuticals to food, clothing and tobacco.
New generation excise stamps
To fight counterfeits, Kenya Revenue Authority has rolled out new generation of excise stamps for excisable goods.
This is part of its strategy to continuously review and improve the security features of excise stamps to deter counterfeiting.
The excisable products covered include alcoholic beverages, tobacco and tobacco products, water, soft drinks and juices.
KRA informed key stakeholders in the excise industry including all manufacturers, importers, distributors, wholesalers and retailers of excisable goods, of the rollout through a public notice published on November 30.
The introduction of the new excise stamps is in line with the provisions of the Excise Duty (Excisable Goods Management System) Regulations, 2017 that requires all excisable products manufactured in or imported to Kenya, with the exception of motor vehicles, be affixed with excise stamps.
"The new generation stamps have enhanced security features leveraging on technology which are meant to deter counterfeiting," notes Rispah Simiyu, KRA Commissioner for Domestic Taxes.
The security features that can be verified using stamp verification tools provided to enforcement officers.
Members of the public can also verify the stamps using the Soma label mobile phone app available on Google Play Store or Apple Store.
The rollout will be implemented in three phases with the first one targeting wines, spirits, ready to drink beverages, beer and other tobacco products.
Water, soft drinks and juices will have the new stamps from December 28, whereas tobacco products and keg beer will be covered from February 1, 2022.
A user guide on this is available on the KRA website.
The excise sector accounts for 6.6 per cent of ordinary revenue collections in VAT, excise and other taxes.
This is therefore a critical sector for revenue mobilization.
In the last financial year, KRA collected Sh 62.409 billion of domestic excise revenue against a target of Sh62.148 billion, translating to a performance of 100.42 per cent.
LOOPHOLE
KRA has identified various tax evasion schemes that have been utilised by some taxpayers in this sector.
They include use of counterfeit excise stamps on excisable products, sale of excisable goods without stamps, sale of vatable goods without issuance of a proper tax invoice, manufacturing of excisable products without excise licenses and use of proxy companies to procure raw materials.
Other schemes identified include under declaration of production, failure by manufactures to account for excise stamps, production of fake delivery notes, issuance of invoices with fake Personal Identification Numbers (PIN), and conveying of illicit goods using various modes of transport to aid concealment of the source and ownership of the goods.
Over the last five years, KRA has estimated revenue lost from tax evasion in the sector to be approximately Sh70.3 billion, denying the country the much needed revenue for financing national economic development programmes.
MEASURES
To deal with the above challenges, KRA has put in place measures and interventions to monitor, reform and enhance revenue collected from the excise sector.
These include enhanced market surveillance on all excisable products in the market, adoption of multi-agency approach in fight against illicit trade and enhanced gathering and management of tax intelligence, to improve revenue monitoring and protection.
It has also put in place a robust investigation and prosecution of suspected entities engaged in any form of illicit trade and tax evasion.
There is also a whistle blowing framework and channels that allow members of the public to share information on illicit trade activities and other tax evasion schemes.
KRA has further invested in technology such as Excisable Goods Management Systems, Electronic Cargo Monitoring System and other systems to enhance the fight against illicit trade and tax evasion.
It has strengthened strategic partnerships with market leaders and key stakeholders in the private sector and enhanced management of borders to combat illicit cross-border trade.
"KRA calls upon all manufacturers, importers, distributors, wholesalers and retailers of excisable goods to support the rollout process and the fight against illicit trade," Simuyu said.
During the release of the survey on illict trade, StoCK chairman Stephen Mutoro said: “Government must prioritise the fight against illicit trade. The agencies tasked with tackling this scourge must revitalise their efforts and win back the confidence of the public."
The perpetrators growing rich at the expense of the economy and the lives of innocent people must be brought to justice, he added.