A row of taxpayers with processors configures consumers for expensive products

An announcement by the Kenya Revenue Authority, which expands the use of excise stamps on bottled waters, processed juices and cosmetics, has opened the way for the operational intrigues of the system attributed to a controversial multinational in 2013.

The Excise Product Management System (EGMS), implemented by SICPA Securities Solutions, would have been too expensive, with the burden on manufacturers who pbad the costs on to consumers in the long run, according to the processors.

The Sunday Nation has taken note of an badysis by the Kenya Manufacturing Association detailing skewed implementation costs for SICPA, whose expats are paid by manufacturers to oversee system installations in production lines.

"It is far too expensive to justify the cost of ink and stamps, which will make all manufacturers covered by this law uncompetitive. The KRA can not justify taxes between 0.50 and 2.80, the cost of the stamp given that manufacturers tend to print batch numbers and that the cost of ink for coding or the stamps is well below the costs mentioned above, "says KAM badysis, also shared. with KRA.

The additional costs that, according to KAM, will reduce sales volume by making products "at a prohibitive cost to the common man" would be higher than those in other countries where similar systems have been used. have been installed, such as Morocco.

Some deputies had expressed similar concerns about flawed contract terms in the 17 billion excise stamp agreement reached between SICPA and KRA. The Swiss company would be the main beneficiary, without the protection being penalized for underperformance.

"The contract stipulates that in case of partial or total cancellation, and if the KRA is in default, the authority will refund to SICPA within 30 days all reasonable investments and expenses made by the SICPA", said Attorney General Kennedy Ogeto at the Public Investment of the National Assembly. Committee (PIC), which was investigating the awarding of a 17 million EGMS contract to SICPA through a single source.

The team, which was also considering a clause in the ex officio appeal documents requiring manufacturers of excise goods to pay SICPA Sh1.50 for each stamp attached to each item – yielding billions of shillings to the Swiss company , did not share the transaction and SICPA is now ready to implement the same system on bottled water as of September 1, according to KRA.

Manufacturers who remain opposed to the extension of the system also blame SICPA for not having maintained its SICPATRACE system optimally, which has slowed down production and aggravated losses.

According to the manufacturer, the system often breaks down and rejects some poorly coded products, accounting for up to 1.5% of production line downtime and lost sales.

Other costs related to the modernization of the production line to adapt to the new system have been added to the manufacturer's capital expenditure.

They must install blowers that dry bottle caps prior to coding, create server rooms, fiber optic cabling, and synchronize software and hardware.

"When installing and adjusting the EGMS system, manufacturers will need to use equipment equipment experts (OEMs) from abroad to be present when installing on the lines to do not cancel the warranty. According to industry estimates, the cost of the presence of OEMs will be about 150,000 euros (17.3 million shillings) per line, "wrote KAM.

The Swiss firm did not answer our questions at the time of going to press.

Critics of the tax surveillance system, such as the director general of the Institute of Economic Affairs, Kwame Owino, have also questioned the new initiative to expand the scope of the EGMS application even though it is unclear whether SICPA has been dispelled in the past when awarding the contract.

Owino, who also rejected KRA's justification that the system had been instrumental in raising tax revenues, said the September deployment was an extension of SICPA's stay.

"We all know how this contract was awarded with controversy and now that the SICPA contract is supposed to end in about two years, KRA could just add its reserve," Owino said.

In addition to the lack of consultation before system deployment and expansion decisions are made, manufacturers are also concerned that the rate may not be indexed to the value of the products and may also change from time to time, making it unpredictable.

The cost of the excise stamp on a pack of cigarettes, which sells on average 100 shillings, is 2.80 shillings.