Swiss firm denies employing a relative of KRA employee

A Swiss firm awarded the Sh17.7 billion excise tax system says it has not employed any Kenyan related to a Kenya Revenue Authority staff in their offices abroad.

SICPA Security Solutions said it has a clear corporate code of conduct and recruitment policies that prevent it from known conflicts of interest. “SICPA has a clear corporate code of conduct and strong HR and recruitment policies which preclude known conflicts of interest and which promote equal opportunities based on competence,” the firm said in a statement.

The firm was responding to allegations that it had employed a Kenyan in one of its offices abroad who is related to a KRA official.

The company said it does not have Kenyan employees out of Kenya. However, SICPA Kenya, a subsidiary of Switzerland- based SICPA Security Solutions has 70 Kenyan employees locally.

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Parliament’s Public Investments Committee (PIC) is currently investigating the contract and has ordered that the system be suspended until investigations are complete.

SICPA initially signed the contract in December 2012 at a cost that was later renegotiated. The original contract was for making excise stamps for tobacco products, wines and spirits but the Treasury, through a Legal Notice number 110 of June 2013 increased the scope to cover beer, bottled water and soft drinks. The five-year contract worth Euros 20,341,464 was originally to provide 3.55 billion stamps a year but this was later reviewed to Euros 158,213,898 (Sh17.7 billion at current exchange rates) for 12.87 billion stamps.

However, a source close to SICPA’s leadership who requested not to be named said SICPA bears in return all upfront investments and shelters KRA from line marking automation costs which was the core reason for restructuring the contract, whose request came from the taxman. The contract sets the cost per stamp at Sh1.50. Manufacturers see the Sh1.50 stamp duty fee per bottle that rolls out of their machines as too steep given that the technology can allow the fee to be less than 30 cents a bottle.

However, our source said the industry only invests in stamp applicators and providing internet connection to KRA, the only items out of the scope of the Excisable Goods Management System (EGMS) solution.

East African Breweries (EABL) argues that the EGMS had imposed an unnecessary cost burden on its business. Coca-Cola estimates that it would require up to Sh1.4 billion to modify its production lines in Kenya besides the huge annual costs involved.

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Recently, the Public Procurement Oversight Authority (PPOA) supported the taxman for awarding the tender to the Swiss company. PPOA Director General Maurice Juma said engaging the Swiss firm for provision of additional stamps was a reasonable option. “Management of two separate contracts for the same services and goods could have posed contract management challenges such as aligning delivery schedules and compatibility of services and associated goods,” said Juma.

Juma added that the firm had already installed software for stamp verification, which had proprietary features, in the previous Sh4.55 billion tender.

In its review note, the procurement authority noted KRA had processed applications from six bidders. The Swiss-headquartered firm, the authority said, had been assessed as the best provider of the services after scoring 75.5 per cent.

This becomes the latest system that has been met by resistance and fallout after procurement. Last year, KRA was dragged to court over the Sh1.2 billion Customs Management System (iCMS), which is meant to modernise customs processes.

It was allowed to roll it out after the High Court dismissed a suit in December that was challenging the award of a tender for the development of a new customs system.

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