Price of new tax stamps high, manufacturers tell Parliament

A lobby group has opposed the price set for digital stamps meant to track tax payable on goods.

In a memorandum sent to Parliament, the Kenya Association of Manufacturers (KAM) said pricing the cost at about 7 cents and then selling it at 60 cents, giving the printer Sh22.8 billion a year, was inflated.

Paying for the stamps, it said, would subject manufacturers to double taxation, higher than in other countries.

“The cost proposed cannot justify the cost of stamp as manufacturers tend to print batch numbers and the cost of ink for coding or for stamps is nowhere near the above mentioned costs,” KAM said.

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The association estimated that the country had an installed bottling capacity in excess of 500,000 bottles an hour, which translates to 12 million a day, 360 million a month and 4.32 billion a year (assuming 100 per cent capacity utilisation).

The estimated actual cost of a stamp is about 7 cents, which when multiplied with the production capacity cost is equivalent to Sh3.024 billion, whereas collecting revenue from the proposed stamp duty of 60 cents will equate to Sh25.9 billion.

“There is cost disadvantage for manufacturers to the tune of Sh22.88 billion, hence the implementation is not revenue-neutral,” KAM said.

Manufacturers are fighting the application of the Electronic Goods Management System (EGMS), which was supposed to go live on cosmetics, bottled water, beer, soda and cigarettes this month, but was suspended by Parliament.

Manufacturers have opposed the Sh17 billion EGMS contract to Swiss firm SICPA Securities Solutions, cite excuses such as cosmetics have a small print area and that they will incur extra cost to dry bottle tops before printing.

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They have also argued that they will incur a cost of at least Sh17.4 million per line to bring in experts during installation so as not to lose warranties and have asked the Government to bear the costs by offsetting them against the payable excise taxes.

Kenya Revenue Authority Commissioner General John Njiraini has accused those opposing the rolling out of the EGMS of trying to frustrate efforts to combat illicit production of goods and evasion of tax.  

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Kenya Association of ManufacturersEGMS stampsExcise dutytax stampsElectronic Goods Management System