Manufacturers fear KRA tool to leak trade secrets

KRA headquarters Nairobi
Times Tower, the headquarters of the KRA, in Nairobi. FILE PHOTO | NMG 

Manufacturers have raised the alarm over possible theft of their trade secrets through a tool that Kenya Revenue Authority (KRA) intends to install on industrial production lines to monitor the flow of goods due for excise tax.

The Kenya Association of Manufacturers (KAM) Wednesday told Parliament the requirement that its members load the Excisable Goods Management System (EGMS) equipment on their production lines leaves them at the mercy of the taxman.

KRA has been implementing new excise duty stamps through the EGMS for beer, mineral water, juices and soft drinks.

New system

The new EGMS system is designed such that details of each excise stamp appended on a product at the point of manufacturing are captured by the system at the time of printing and then tracked along the supply chain right from the production facility.

The taxman will monitor production lines in the factory for output of the goods due for excise tax and manufacturers are concerned that their trade secrets could end up at a rival’s doorstep through the captured data.

“Operationally the EGMS adds a cost and it makes competitiveness of local manufacturers difficult. Coupling this equipment with our already existing machines is industrial espionage being encouraged,” said KAM vice chair Mucai Kunyiha.

KRA argued charging excise duty on the mentioned goods would generate an additional Sh3.6 billion more in taxes.

The government had on October 3, 2017, given a public notice announcing that with immediate effect from November 1, 2017, bottled water, juices, soda and other non-alcoholic beverages and cosmetics manufactured or imported into Kenya would be affixed with excise stamps.

The tax changes are contained in the new Finance Act, in which, water manufacturers will be forced to pay Sh0.2 on Excisable Goods Management System duty and additional Sh0.5 Stamp Duty.

Cost of loading

The KRA requires that manufacturers bear the cost of loading the EGMS equipment in their plants as well as rearranging production lines.

The manufacturers said it is unfair for them to bear the stamp cost, warning it would increase the cost of production.

Mr Kunyiha said some manufacturers use complex imported machines which would require that they liaise with technicians abroad on installation of the stamp machine.

KRA is on the spot for single sourcing the Sh17.7 billion e-tax job to the Swiss firm (SICPA), which has been accused of corrupting tax agencies in Brazil, Albania, Morocco and the Philippines.

The KRA said the decision to suspend implementation of the system was arrived at following consultations with stakeholders including Water Bottlers Association on Kenya.