Economy

Taxman raids top hotels in fake excise stamps crackdown

kra

The Kenya Revenue Authority headquarters at the Times Towers in Nairobi. FILE

Major hotels, supermarkets and entertainment spots were caught up in a crackdown by the Kenya Revenue Authority on fake excise duty stamps.

Hilton Hotel, Intercontinental, The Tribe, Sarova Panafric, Eka Hotel, Boma, and Sarova Stanley were affected by the raids that mainly targeted hard liquor and wines. Displaying fake excise duty stamps attracts a fine of Sh1.5 million.

“It is an ongoing surveillance on excise duty to make sure everybody complies. We found they were using fake excise stamp duty and there were quite a number of both small and big hotels,” said KRA head of marketing and communications Kennedy Onyonyi in a telephone interview.

The raids started just before Christmas with KRA officials impounding wines and spirits bearing the excise stamps that were to be phased out on November 5, after an earlier deadline in April was extended. Mr Onyonyi said the impounded stock would be used to trace the suppliers.

However, the top-end hotels argue that the products are sourced from accredited distributors including East African Breweries Limited (UDV subsidiary), Keroche Breweries, London Distillers and KWAL who are charged with ensuring that the products have the excise duty stamp.

Kenya Association of Hotel Keepers and Caterers (KAHC) Nairobi region chairman Anthony Ngunga blamed the raids on KRA’s failure to follow through on an agreement that the hotels be equipped with gadgets to detect genuine from fake excise duty stamps.

“We have no capacity to investigate the fake from genuine and we trust our suppliers. They are accredited. Six months ago they promised they would deliver gadgets to tell the fake stamps, but we are still waiting,” said Mr Ngunga.

He said some members had lost almost half their liquor stock after KRA held them liable for not having the new generation excise stamps, which bear more security features.

Earlier in the year, KRA moved to phase out the first-generation excise stamps from tobacco, wines and spirits in its latest campaign to rid the market of sub-standard goods and curb tax evasion. Swiss security printer, SICPA, was competitively procured by KRA to make the new generation stamps under a five- year contract.

READ: KRA phases out excise stamps in war on fakes

KRA had previously put a deadline of April for the market to comply with the new electronic digital stamps. A notice published by the Domestic Tax Department gave November 5 as the deadline for all manufacturers and importers to comply with the new law.

“Kenya Revenue Authority wishes to inform all manufacturers and importers of tobacco products, wines and spirituous beverages to start online activation with effect from 5th November, 2013. No tobacco products, wines and spirituous beverages should be released to the market from 5th November without activated excise stamps,” said the notice.

The notice said delivery of products without the stamps to the market after the date would be an offence, for which KRA would take appropriate action.

Nairobi County Business District Association chairman David Gachuru said establishments should not be held liable for mistakes committed in bonded warehouses where KRA officers are in charge.

“This is a shortsighted way of making money. It was unfair how they carried out the whole exercise,” Mr Gachuru said.

The taxman had said it would only allow new products bearing the new generation stamps in the market except those bearing old stamps affixed before the April 14 deadline.
Also affected by the ongoing impounding by tax officers are other wines and spirits stockists such as supermarkets.

The old generation excise stamps on wines and spirits were introduced on January 1, 2007 in the hope of curbing dumping and tax evasion.

Lax enforcement of the law and collusion among market players, however, has seen shrewd businessmen produce fake stamps that are used to pass off products to unsuspecting consumers.

To increase its collections, KRA extended the use of excise stamps to other beverages including juice, sodas and bottled water. For the first quarter ended September 2013, KRA exceeded its tax collection by Sh3.6 billion. The taxman collected Sh228.4 billion during the period compared to a target of Sh224.8 billion.