Swiss multinational security printer, Sicpa, is set to pocket Sh2 billion from the taxman as part of a settlement of pending bills for the supply of excise duty stamps.
The Treasury has allocated the Kenya Revenue Authority (KRA) the money towards settling part of old pending bills of Sh4.48 billion that is due to Sicpa in the mini-budget currently before Parliament.
The KRA and Sicpa entered into a five-year contract for the provision of excisable stamps on a range of consumer products, including soda, bottled water, fresh juices, beer, spirits, cosmetics and cigarettes.
The National Assembly’s Finance and Planning committee said the Sh4.8 billion is owed to the supplier of the Excisable Goods Management System (EGMS) project.
“Kenya Revenue Authority (KRA) has pending bills totalling Sh6.7 billion as follows: Sh4.48 billion for the EGMS Project where the National Treasury has provided Sh2 billion in the financial year 2022/23 Supplementary budget 1, and the balance is to be provided in the financial year 2023/23,” Kuria Kimani, who chairs the committee said in a report.
The committee said the KRA has been allocated Sh9.1 billion in the general administration to enhance its budget provisions and settle pending bills.
“The allocation will support expenditures including paying Sh2 billion as part of settling old pending bills of Sh4.47 billion to the supplier of excise duty stamps on bottled water,” Mr Kimani told the Budget and Appropriations Committee (BAC) which is receiving committee recommendations on the mini-budget.
The excise stamp contract is a multi-billion-shilling deal, involving the printing of stamps and the provision of track and trace technology to detect fake stamps.
The disclosure of the pending payment of Sh2 billion came barely a week after Minority Leader Opiyo Wandayi questioned plans to renew a five-year tax stamp contract between KRA and Sicpa arguing it was shrouded in mystery.
He described the new deal as “a well-articulated scheme to steal from the unsuspecting public.”
The Minority Leader demanded a halt on any plans to renew the contract and a comprehensive audit be conducted by the Auditor-General on all funds paid to KRA by manufacturers.
Mr Wandayi's demands followed a heated debate over a public notice by the KRA, in which the taxman expressed intention to impose massive increases in the prices of Sicpa stamps on soda, bottled water, fresh juices, beer, spirits, cosmetics and cigarettes.
The Excise Duty (Excisable Goods Management System) (Amendment) Regulations, 2023 proposes to raise the stamp fees for cosmetics from 60 cents per stamp to Sh2.50 — a margin of 317 percent — while the stamp fee for fruit juices and non-alcoholic beverages such as sodas will go up by 267 percent to Sh2.20 from 60 cents.
The cost of a stamp affixed on a beer bottle will double to Sh3 from Sh1.50, while those for spirits, wines and tobacco products are set for a 79 percent rise to Sh5 from the current Sh2.80 per stamp.
The Kenya Association of Manufacturers (KAM) has warned that the proposed increases were bound to increase their costs and precipitate spiralling increases in consumer prices of the affected commodities.
The excise stamps are meant to deter counterfeiting and enable tracking of excisable goods along the supply chain, which helps the taxman compute the excise due from manufacturers and importers.
In the year ending June 2022, the KRA collected Sh256.3 billion in excise taxes, equivalent to 13 percent of the KRA’s total revenue collection of Sh2.03 trillion.
For the KRA, the drive to grow the takings from sin taxes has been hampered by a proliferation of fake excise stamps that allow rogue manufacturers and importers to evade paying up, giving them a huge market advantage over compliant businesses.
Speaking last October, President William Ruto said the country ought to be selling between 10 and 12 billion excise stamps annually but expressed concern that the KRA is only shifting 2.9 billion stamps with the remainder being produced by counterfeiters.
Earlier, the KRA had estimated that it loses up to Sh12 billion annually from excise duty evasion from the local manufacturing sector.
