Parliament scuttles KRA's Sh4bn non-alcoholic drinks sin tax plan

NAIROBI, KENYA: Parliament has scuttled a strategy by the Kenya Revenue Authority (KRA) that would have seen it collect Sh3.6 billion excise tax on bottled water, cosmetics and other non-alcoholic drinks.

The taxman had planned to roll out its Excisable Goods Management System (EGMS) on August 1, but National Assembly Speaker Justin Muturi said the agency did not seek the blessings of parliament before implementing the new system.

“If something that  has the force of law is being implemented before passing through this house, then it is null and void,” said  the Speaker, who added that the  regulations  by KRA should have been tabled before the house 7 days after gazzetment and  adopted by members.

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Mr Muturi was responding to a request by Cherangany MP Joshua Kuttuny, who sought his direction on the impeding implementation of controversial system by KRA.

Mr Kuttuny   in a petition wants the authority to postpone the roll-out of system until the National Assembly Public Investment Committee (PIC) concludes a probe on how a Swiss firm was awarded a Sh17 billion tender for the EGMS system.

 According to the MP, EGMS e-tax service was single-sourced from SICPA Security Solution SA Limited. Already manufactures of bottled water and fruit juices are up in arms over the excise stamps.

The Abdulswamad Nassir(Mvita)-led committee launched investigations into a clause in the tender documents that requires manufacturers of excisable goods to pay the SICPA Solutions  Sh1.50 for every stamp attached on an item.

 “Treasury should confirm that the tender award to SCIPA was executed in strict compliance with provisions of the Public Procurement and Disposal Act. Members of the Tender Committee should be investigated for single-sourcing SICPA and action taken,” he said.

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Kuttuny explained to the house   that  average number of bottles of soft drinks is 30 million per day so the SICPA collect approximately Sh54 million if the Sh1.50 cost per stamp is imposed.

“This means that in a month, the SICPA will mint Sh1.2 billion and a total of Sh16 billion in a year. With a contract running for five years, SICPA will reap Sh81 billion in a tender originally negotiated for Sh17 billion. This is a monumental reap-off,” he   said.

 “Manufactures are being forced to install this expensive system at their own costs when what is needed is simple reconfiguration on production lines to give KRA what they want."

If the new system is not suspended, bottled water, juices, soda and other non-alcoholic beverages and cosmetics will be affixed with excise stamps. This is whether they are imported or manufactured locally.

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Kenya Revenue AuthorityExcisable Goods Management SystemCS Henry Rotich