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Economy

KRA loses Sh7.3bn to fake stamps, goods

Mr John Njiraini, KRA commissioner-general. PHOTO | FILE
Mr John Njiraini, KRA commissioner-general. PHOTO | FILE 

Fake stamps and counterfeit goods caused a Sh7.35 billion fall in excise tax in the six months to December 31, prompting the taxman to renew its war on illicit alcohol.

Excise taxes fell by nine per cent in July-December 2017 compared to Sh81.644 billion realised in the same period a year earlier, the Kenya Revenue Authority (KRA) reported on Monday.

The performance was a sharp climb-down from average annual growth of 16 per cent in the last three years, commissioner-general John Njiraini said.

Duty collected from sale of beer, cigarettes and spirits — the main revenue streams — declined by 16.3, 16.0 and 11.2 per cent, respectively, compared to 2016.

“Industry analysts term the performance as unusual given what would otherwise have been a strong season given election-related consumption,” said Mr Njiraini.

The KRA will in two weeks from today conduct sensitisation workshops in a multimillion-shilling campaign targeting 35 towns countrywide, commissioner of Domestic Taxes Benson Korongo said in a notice yesterday.

Alcohol manufacturers, distributors, retailers and importers as well as the police will be sensitised on how to verify genuine alcoholic products using smartphones through an app dubbed “Soma Label”.

There have been growing concerns among some liquor manufacturing firms over inadequate public awareness on the app unveiled when the KRA introduced new generation excise stamps for wines, spirits, tobacco, and beer in September 2016.

A section of liquor firms mid-January said the KRA was losing up to Sh1 billion monthly to firms producing alcohol, especially spirits, outside the Electronic Goods Management System (EGMS).

President Uhuru Kenyatta in July 2015 ordered a countrywide crackdown on illicit production of alcohol, an exercise that saw registered liquor manufacturers drop from 177 to 21.

This was after the Inter-Agency Task Force on Control of Potable Spirits and Combat of Illicit Brews, formed by the late Interior secretary Joseph Nkaissery, found 114 licensed firms to be unfit to make spirits for human consumption.

KRA, which is partnering with the taskforce and Alcoholic Beverages Association of Kenya (ABAK) in the renewed fight on fakes, has this year gazetted 28 firms allowed to process spirits from 29 last year.

One of the main distiller of spirits on January 15 claimed some of the licensed spirits makers were selling 205 and 250 millilitre spirits to distributors for between Sh70 and Sh75 per piece – a price too low given the Sh200 excise duty per litre, the 16 per cent VAT and other overheads.

KRA commissioner for intelligence and strategic operation Giithi Mburu said on February 6 more than 50 firms, largely in alcohol and cigarettes production, were under investigation for tax fraud despite implementation of EGMS.

“The challenge (of illicit alcohol) is still there. We have some illegal products within the country, but we are handling that,” Mr Mburu said.

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