KRA halts tender, blames procurement regulator

By KENNETH KWAMA

The tax collector has halted the award of a tender for a project that would have substantially increased revenue collection and blamed the Public Procurement Oversight Authority (PPOA) for

A worker burns counterfeit drugs. KRA admits it has intercepted several imported consignments of fake excise stamps and charged the culprits in court. [PHOTO: Courtesy]

rigidity, which it says has hampered the procurement process.

The Kenya Revenue Authority (KRA) terminated the process despite the fact that the tender had been concluded and a firm identified to implement it.

The tender for printing, supply and delivery of security revenue stamps fitted with a technology referred to as track and trace system was aimed helping trail wines, spirits and cigarettes in the market to eliminate counterfeits.

It is projected that cigarette and alcohol industry cumulatively lose up to Sh9 billion in sales revenue as a result of counterfeits. Although KRA acknowledged that there are tax leakages arising from counterfeiting of revenue stamps, there are no figures, yet.

Industry sources, however, indicate that the country could be losing up to Sh1 billion monthly to the counterfeits — a situation that could easily have been reversed through implementation of the cancelled tender.

Some MPs are now threatening to veto the candidature of the Commissioner of Domestic Taxes, Large Taxpayers Office John Njiraini under, whose ambit the project falls should he be proposed to replace KRA’s Commissioner General Michael Waweru, whose tenure expires in two months time, citing incompetence.

PROCUREMENT PROCESSES

"Everybody agrees that the project will massively improve revenue collection. How will KRA and Njiraini whose docket has been frustrating the project justify why it has never been implemented?" posed an MP who declined to be named, saying he will lobby other members to reject Njiraini’s candidature for what he referred to as "incompetence" on account of non-implementation of the project.

But KRA says the problem is not Njiraini, but PPOA that it insinuates has been presiding over rigid procurement processes, which have done little but slow down tendering for such important systems.

"We have commenced a process to invite bids for fresh tenders towards end of January," said KRA in response to enquiries by Financial Journal.

Asked to respond to the allegations, PPOA’s Board Secretary Amoth Rasanga wondered why KRA was dragging its name to the muddle.

"PPOA has not stopped the process in any way. It’s not correct to say that," said Rasanga.

KRA has tendered twice for excise stamps for wines and spirits. The first tender was awarded in 2007 but was contested by De La Rue Currency and Security Print Ltd.

The Procurement Appeals Review Board decided in favour of KRA but De La Rue moved to the High Court resulting in a stalemate. The case was settled out of court in 2010 and KRA advertised an Expression of Interest for the Provision of Security Printing and Digital Solutions for Revenue Protection on August 19, 2010.

Twenty-one firms responded out of which nine were pre-qualified for the next stage. The tender for printing, supply and delivery of security revenue stamps with track and trace system to cater for wines, spirits and cigarettes was sent to the pre-qualified firms on June 17 last year.

"The tender closed on September 2, 2011, and six firms submitted their bids. Upon evaluation, only one qualified for consideration for award. The tender was, however, terminated on October 12, last year, as the cost was well above the budgeted funds," explained KRA.

INITIAL TENDER

Njiraini says the authority had considered the use of digital stamps, but slowed down because this required adequate preparations including the implementation of a reliable high-speed national Internet infrastructure.

"Our work plan envisages phased implementation with a paper stamp ‘track and trace’ solution being the immediate priority followed by a ‘digital stamping’ solution within three years," says Njiraini.

Although KRA did not reveal the name of the firm that emerged first for the award of the initial tender, Financial Journal learnt it was a foreign firm working as a consortium with a local firm. It is believed the consortium has requisite capacity to carry out the project.

It could thus create a stalemate that might last several other years and allow tax leakages that can spiral into billions if the consortium that had won in the earlier process seeks a stay on the initial proceedings that should have seen it awarded the tender.

The process is likely to be drowned out, however, by the noisy gnashing of teeth that will undoubtedly accompany attempts by MPs to veto Njiraini’s candidature should he be proposed to head KRA in the coming two months.

The authority admits that counterfeits are a big problem and it has intercepted several imported consignments of fake excise stamps and charged the culprits in court.

"Our field surveillance teams have also impounded products affixed with fake stamps and taken those involved to court. These interventions will continue even as the KRA works to reform the current excise stamps management system as explained earlier," says Njiraini.

KRA’s Domestic Taxes automation project commenced implementation in September 2007 and the first phase was commissioned in September 2009.

This provided taxpayers with capability to register online and file tax returns electronically. The system is presently undergoing enhancements to improve functionality and user friendliness.

"Other enhancements will enable KRA undertake more effective data analysis to address tax administration challenges," says Njiraini.