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Columnists

Technology is our best bet to end illicit trade

port of Mombasa
A ship arrives at the port of Mombasa. FILE PHOTO | NMG 

The Kenya Revenue Authority is up in arms against illicit trade and contraband, fighting this menace through the roll-out of the Excisable Goods Management System (EGMS) on bottled water, juices, energy drinks and soda.

EGMS went live on November 13 and stakeholders have been adequately prepared and educated through numerous sensitization and engagement fora. Issues raised at every engagement level have also been comprehensively and exhaustively addressed to ensure that all parties set off for the voyage in the same coach.

The EGMS system was first rolled out in 2013 on tobacco, wines, spirits and beers through affixation of excise stamps on the products. The implementation of the EGMS system on these products has been beneficial, reflecting a positive impact on revenue collection.

This implementation saw a significant improvement in collection in the sector within the financial year in which EGMS was implemented. Thanks to EGMS, excise revenues in this sector have risen from Sh700 million back then to more than Sh5.7 billion per month (excluding excise from airtime and financial services) currently.

EGMS is a system for protection of excise tax revenue which comprises a secure excise stamp production and accounting with track and trace functionalities. It further supports the identification and interdiction of illicit products along the supply chain.

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The implementation of EGMS has been a significant boost in the fight against illicit trade. KRA’s efforts to comb the market for excisable goods whose manufacture and sale contravene the Excise Duty Act have been made easier. The culmination of such efforts is mass destruction of confiscated products. KRA recently destroyed excisable goods worth more than Sh1.5 billion with a revenue implication of over Sh400 million. The goods had been confiscated from various parts of the country.

With time, delinquent traders who had been replicating tobacco and alcoholic products had spread their tentacles to soft drinks and other non-alcoholic beverages. Compared to tobacco and nonalcoholic drinks, the latter products have a wider consumer base. This means that proliferation of contraband soft drinks and other non-alcoholic drinks puts a bigger number of consumers and users at risk. Due to the wider consumer base, the ripple effect of the menace is loss of more revenue not only for the manufacturers but also for the government.

The recent decision by the government to extend use of EGMS on these products is therefore an important step in the journey towards completely combating illicit trade and contraband products in this sector.

The efficacy and success of EGMS on tobacco and alcoholic products so far is guarantee and proof enough that the system has the potential to end the malpractices in other excisable products.

Despite some objection by a section of the industry, the system is of greater benefit to the manufactures than to any other stakeholder. It avails a level playing ground for all the players, which in turn promotes fairness and inclusivity. Fairness and inclusivity are key taxation principles. Looking at the water sector, for instance, the gap between those who have been paying taxes and those who have not been paying is monumentally wide. Statistically put, about 78 percent of the players in the water sector have not been paying their fair share of tax. EGMS will therefore go a long way in bridging this gap.

Ms Meyo is the Commissioner for Domestic Taxes Department at the Kenya Revenue Authority.

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