A plan by the taxman to compel manufacturers to install new internet-enabled cameras at beer, mineral water and cosmetics production plants is facing resistance amid a concerted push to seal leakages in excise duty collections.
The draft Excise Duty (Amendment) Regulations 2023 seeks to overhaul the monitoring and measuring systems at factories with a view of giving the Kenya Revenue Authority (KRA) round-the-clock access to their operations in real-time.
This comes months after President William Ruto, who took power last September, said he had intelligence rogue KRA staff were colluding with unscrupulous traders to print fake excise stamps and deny the exchequer billions of shillings annually.
The proposed regulations require makers of excisable goods like East African Breweries, Coca-Cola, British American Tobacco, Biersdorf East Africa (Nivea), and PZ Cussons among others, to install Internet Protocol (IP) cameras in all areas as directed by the KRA.
The IP cameras, which will transmit real-time data to Time Towers, will have the capacity for infrared night vision, a 360-degree rotating view and cover distance that will be specified by Commissioner for Domestic Taxes Rispah Simiyu.
The surveillance system will also have to support different types of video analytics such as “face detection, people counting, object detection, crowd detection, tripwire, perimeter, scene and defocus detection [and] motion”.
This will be an overhaul of the 2011 regulations which required monitoring and measuring devices to have “capability for electronic data transmission and support remote communication.”
Manufacturers will also be required to install new flowmeters —used to measure the amount of alcohol or cosmetics produced — with an accuracy of plus or negative 0.25 percent as opposed to the current (+/-) 3.0 percent
Factories through the Kenya Association of Manufacturers, the sector’s lobby, have protested the proposed legal changes as likely to “expose company personal and sensitive data” which may breach Data Protection Act, 2019.
“The provisions of the draft regulation will require companies to continuously seek consent from all data subjects who will be in the premise of the manufacturing facility, and which exposes the manufacturer to liability for any breach should the data subject file a claim on the same,” KAM wrote in a memorandum to the KRA seen by Business Daily.
Installation and running costs of the new systems will also be a burden to the manufacturer, making it the other battlefront.
The lobby group has also argued the proposed monitoring system, which should have a 24-hour power backup, may also result in the loss of lucrative production deals for local manufacturers that hold Intellectual Property rights from other jurisdictions.
“The nature of monitoring proposed herein will lead to monitoring of processes that have been contractually secured to protect Intellectual Property holders,” KAM says.
“A breach of this may lead to withdrawal of rights which will impact on productions and reduce on government revenue especially excise duty.”
Excise taxes posted the slowest growth amongst the major streams for the half-year period through last December at 5.4 percent year-on-year to Sh130.3 billion, falling short of the Sh139 billion target.
The new administration has identified excise duty as leading in revenue leakages through the sale of fake stamps.
Dr Ruto has said it was unacceptable that Kenya was selling a measly 2.9 billion excise stamps annually compared with Tanzania’s seven billion and Uganda’s nine billion despite the two economies being smaller than Kenya’s.
The excise stamps sold, he said, were less than a third of Kenya’s potential of 10 to 12 billion stamps.
“There are people who are selling the balance which is approximately seven billion stamps. I have told the Commissioner-General he must tell these people to stop and we have no choice because I do not want to fight with people, but they must stop,” Dr Ruto said on October 28.