KRA phases out excise stamps in war on fakes


KRA headquarters at Times Towers in Nairobi. First-generation stamps have been phased out. Photo/SALATON NJAU

The Kenya Revenue Authority (KRA) has phased out the first-generation excise stamps for tobacco, wines and spirits in its latest campaign to rid the market of sub-standard goods and raise revenue collection.

From April 14, the taxman is only allowing new products bearing the second-generation stamps in the market except those on which old stamps were affixed prior to April 14, senior deputy commissioner in charge of marketing and communication Kennedy Onyonyi said Monday.

“All persons handling excisable goods are expected to verify the stamps and products before receiving, storing and offering them for sale,” the notice said, adding that old stamps affixed before April 14 would only be accepted in the market up to the end of June.

The notice adds: “Any person who manufactures, imports, distributes, retails or found in possession of the excisable goods on which excise stamps have not been affixed shall be guilty of an offence,” the taxman said yesterday in a public notice.

The move by the thinly-staffed taxman effectively turns the heat on manufacturers, distributors, retailers and importers, to play a central role in ensuring tax compliance and eradicating contraband goods.

(Read: Taxman targets contraband traders with new duty stamps)

The old generation excise stamps on wines and spirits were introduced on January 1, 2007 by the Kibaki administration in the hope of curbing dumping and taming tax evasion that was rampant in this segment of the economy.

But lax enforcement of the law and collusion among market players soon saw shrewd merchants producing fake stamps to pass off these products to unsuspecting consumers.

Tabitha Karanja, managing director Keroche Breweries, one of the largest marketers of excisable goods, Monday said the firm was yet to get the new stamps however.

“We are still on the old ones as they have not yet been recalled or exhausted,” she said. KRA said the security features of the new-generation stamps would easily enable consumers, distributors and retailers to verify the authenticity of the stamps affixed on the excisable products.

By locking out contraband tobacco, wines and spirits from the local market, the taxman hopes to squeeze out additional Sh6 billion from the economy.
Apart from illegal cigarette and alcoholic drinks, the entire market for fake and substandard goods is estimated to be worth Sh70 billion in turn over.

“We are mainly banking on manufactures and traders to ensure they handle genuine goods because ordinary consumers may have some difficulty in detecting the right stamps,” Mr Onyonyi told the Business Daily.

The new directive comes hot on the heels of the official statistics showing that KRA’s actual collections for the first nine months of the 20012/13 financial year stand at Sh560.4 billion, 63.4 per cent of KRA’s annual target.

This means the taxman must collect Sh321 billion between this month and June—nearly double the Sh186.8 billion average collection that it has been recording on quarterly basis—to meet the annual target of Sh881.2 billion that the Treasury set in the budget.

(Read: KRA faces tough last quarter with Sh365bn tax gap)

The move to squeeze out contrabands has traditionally received cautious welcome from local manufacturers of cigarettes and alcoholic drinks.

The group which includes British American Tobacco, Mastermind Tobacco, East African Breweries Ltd, Kenya Wines Agency, Keroche Breweries Ltd and London Distillers want the government to fully supervise compliance with the new regulation.

“People are faking the excise stamps on the street. The move is much welcome as it will make this more difficult and make competition fairer,” Keroche Breweries CEO Tabitha Karanja told the Business Daily early this year when KRA announced the plan to introduce the upgraded stamps.

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