Kenya Revenue Authority (KRA) has launched a nationwide crackdown on traders yet to comply with the excise duty rule on bottled water, juices, and non-alcoholic drinks.
A section of manufacturers last week blew the whistle on fake excise duty stamps which have flooded the market, denying KRA taxes, while eating into compliant traders’ market by offering cheaper non-compliant products.
Hard hit are bottled water manufacturers and dealers, with products without excise stamps selling widely in the market, despite the Excisable Goods Management System(EGMS) rule on bottled water, juices, and non-alcoholic drinks coming into force on November 13.
“Our enforcement team is on the ground to ensure compliance. KRA has also allowed the public to report any tax evaders through intelligence gathering and whistle blower reporting for KRA to take the necessary action,” commissioner for domestic taxes Elizabeth Meyo said.
She said KRA noted that some of those refilling bottled water were not affixing stamps, hence the public notice issued last week, warning against non-compliance of tax measures put in place.
KRA had given licensed manufacturers, importers, distributors, and retailers up to February 29, 2020, to clear old stock and comply with the new system, which it banks on to boost revenue collection.
The Coast Bottled Water Manufacturers Association (COBWMAS) and the Water Bottlers Association of Kenya (WBAK) have raised concerns over rogue players in the market whom apart from selling with fake stamps, they are also swapping stamps.
Under-declared or swapped stamps involves the affixing of, for instance, a 300ml stamp on a five-litre bottle, where KRA loses 4.7 litres declaration to the unscrupulous dealers.
In a response to inquiries by the Star, KRA said its enforcement officers are working with Multi-Agency Team to “weed out all the fakes in the market”, and enforce stringent penalties under the Excise Duty Act and Tax Procedures Act.
These include hefty penalties, forfeiture and destruction of the goods with fake stamps and prosecuting persons found in possession of these goods.
KRA has also called on the public including manufacturers, importers and traders to verify products using the smartphone application (Soma Label), through which they can assess the authenticity of tax stamps on products in the market.
“Soma Label has now been upgraded to simplify the authentication processes and is working as expected on both stamps with a QR code and a Data matrix,” the taxman said on email to the Star.
A section of manufacturers last week singled out Mombasa, Nairobi, Naivasha, and Kisumu as the most affected towns, where rogue dealers are making a kill.
This is the second phase 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.
KRA stands to lose up to Sh4 billion in excise tax alone if fakes continue to thrive, what would dent its efforts to meets its revenue target, projected (domestic revenue) at Sh1.6 trillion in the current financial year.
EGMS which is meant to enhance compliance, address illicit trade, and boost revenue collection, has the potential to help the taxman collect in excess of Sh9.6 billion, the authority notes.