KRA to post own staff in factories for tax checks

What you need to know:

  • Regulations tabled in Parliament by the Treasury show that KRA officers would be stationed at factories producing excise tax-covered goods such as beer, wines and spirits, cigarettes, mineral water, soft drinks, juices and airtime.
  • The seconded officers will monitor the production of goods that attract excise tax right from the point of manufacture to safeguard revenue.
  • The taxman has since 2019 implemented the Excisable Goods Management System that compels manufacturers to affix their products with e-stamps in a bid to minimise cheating in taxation.

Large manufacturers face deeper scrutiny of their operations after the Treasury endorsed posting of Kenya Revenue Authority (KRA) staff to their factories as part of efforts to curb tax evasion.

Regulations tabled in Parliament by the Treasury show that KRA officers would be stationed at factories producing excise tax-covered goods such as beer, wines and spirits, cigarettes, mineral water, soft drinks, juices and airtime.

This means that big firms such as Kenya Breweries that manufactures alcohol, Coca-Cola (soda) and British American Tobacco (cigarettes) will be obligated to provide appropriate office space and facilities to KRA officers posted to their respective premises.

The directive also covers manufacturers of juices, energy drinks, non-alcoholic beverages and cosmetics such as Delmonte, Kevian Kenya, Jetlak Foods, PZ Cussons, Blue Plastics and Water Co. Ltd, Aviano Limited, Kenafric Industries, Buyline Industries, Biersdorf East Africa, L’Oreal East Africa and Kenya Tea Packers Limited.

“The commissioner may, for purpose of ensuring proper excise control, require a licensee to provide suitable accommodation and equipment in a factory for the authorised officer responsible for excise control at the factory,” states the Excise Duty Regulations 2020 that is currently before MPs for scrutiny.

The seconded officers will monitor the production of goods that attract excise tax right from the point of manufacture to safeguard revenue.

The taxman has since 2019 implemented the Excisable Goods Management System that compels manufacturers to affix their products with e-stamps in a bid to minimise cheating in taxation.

The excisable goods, whether imported or manufactured locally, are require to be affixed with excise stamps. The taxman contracted SICPA SA, a Swiss multinational, to provide solutions for affixing stamps on products rolling out of production lines.

Through the EGMS, the taxman aims to raise Sh4 billion from bottled water, juices, energy drinks, soda and other non-alcoholic beverages annually.

The new regulations published by Treasury Cabinet Secretary Ukur Yatani and tabled in Parliament on August 4 require manufacturers or importers of excisable goods to facilitate the installation of a product accounting system in the premises where the goods are made.

The KRA recently said it had set its eyes on a number of high net worth individuals and firms suspected of tax evasion, adding that it would deploy its officers to their premises to help recover tax dues.

The taxman has hinged this aggressive pursuit of tax cheats on the Tax Procedures Act, which empowers the agency to seek taxes directly from sales and third parties like banks and suppliers as well as seize and auction property to recover unpaid duty.

The taxman is also preparing to hire 1,000 intelligence and enforcement officers to identify and arrest wealthy tax cheats. The agency has been allocated additional cash to hire the new staff.

The KRA has also been analysing companies’ financial dealings, especially those doing business with the national government and counties, to unearth tax cheats by matching their payments and income declared. The Tax Procedures Act, which grants the taxman unfettered powers, also provides the KRA with powers to freeze tax cheats’ property transactions and auction the assets to recover the unpaid tax.

Vehicles, land, houses, office blocks and workplace equipment will be on the KRA radar at a time when it has stepped up the war against tax cheats.

The KRA enforcement unit has been using various databases to pursue suspected tax cheats, including bank statements, import records, motor vehicle registration details, Kenya Power records, water bills and data from the aviation regulator to reveal aircraft owners.

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