Njiraini on the spot over Sh17.7bn tax tender award

Parliament has put Kenya Revenue Authority (KRA) commissioner-general John Njiraini in the spotlight over the direct procurement of a Sh17.7 billion e-tax tender that was awarded to a Swiss firm accused of corrupting tax agencies in Brazil, Albania, Morocco and the Philippines.

The Public Investments Committee (PIC) questioned the award of euros 158,213,898 (Sh15.9 billion at 2013 exchange rate) for the procurement of Excisable Goods Management System to SICPA Security Solutions SA Limited.

The committee, chaired by Eldas MP Adan Keynan, had summoned Mr Njiraini over the tender that was awarded a year and a half into an existing contract  of Sh2.28 billion (20.34 million euros). The contract was awarded to the Swiss firm prior to March 2013 General Election.

The committee is investigating the award of the Sh1.50 per stamp tender that the KRA entered into with SICPA, which manufacturers of water, soda and fruit juices have opposed.

“Legal Notice No 110 of June 2013 requires that manufacturers and importers defray the cost of the system. Subsequently, a stamp price of Sh1.50 was gazetted on November 9, 2013 after KRA had determined the cost of the system through a tender process,” Mr Njiraini said.

He acknowledged challenges in implementing the system, saying the KRA is working with the Treasury to introduce a sliding scale charging mechanism where high value products pay more than low value products.

Mr Njiraini, while defending the contract, denied knowledge of SICPA’s involvement in corruption in Brazil, Morroco, Albania and the Philippines.

Mr Keynan and PIC vice chairperson Kimani Ichung’wa said SICPA had been mired in corruption in countries it had won contracts.

“This information is in public domain. SICPA has had serious problems with tax agency in Brazil where they won a similar contract and inflated the prices, which were passed on to consumers. Are you aware of this?” Mr Ichung’wa asked.

Mr Njiraini said he did not have prior information that the Swiss firm, which won an original competitive international tender for EGMS, was involved in any malpractices.

“I am not aware of corruption allegations against SICPA. We deal with many international companies. I will have to check. The key thing is to run the process in a transparent manner that gives us value for money,” he said.

Mr Njiraini promised to provide further information on why KRA decided to use direct procurement in the EGMS system. He said had detailed grounds that led it invoke provisions of the procurement law that allows for direct procurement.

READ: House grills Njiraini over Sh1.2bn tender award

He said the change in law in 2013 increased the scope of excisable products to include beers, water and soft drinks.

He said KRA acted pursuant to Legal Notice number 110 of 2013 in expanding the scope from tobacco products, wines and spirits.

Mr Njiraini said the change of law for excisable goods on June 18, 2013 increased the scope of goods with the existing contract being for 3.55 billion stamps while the extended scope was estimated to be 12.9 billion maximum number of revenue stamps.

KRA negotiated with SICPA Security Solution SA, the winner of the tender for printing, supply and delivery of security revenue stamps complete with Track and Trace system and integrated production accounting system, on January 15, 2015 and awarded it fresh contract through direct procurement method at an estimated cost of Sh15.9 billion (euro 158,213,898).

The five year contract commenced immediately on termination on the current tender of Sh2.28 billion (euros 20.34 million). The new contract was to accommodate an aggregate usage stamp fee of euro 13.25 per 1000 stamps.

Mr Njiraini disputed manufacturers claim that the installation of the system is expensive and will cost them about $1 million (Sh101.6 million) to modify one production line.

Modifications are only required when the production system of the manufacturer does not fully comply with the requirement of the system.

In most cases, these facilities are available and therefore no additional investment is required,” Njiraini said.