KRA, Swiss firm on the spot over multi-billion excise deal

The Kenya Revenue Authority (KRA) and the Swiss firm SICPA are in a fresh spotlight over a multi-billion service contract to monitor the production of cold beverages such as beer and soft drinks.

This is after Minority Leader Opiyo Wandayi questioned the manner in which the multi-billion contract was executed and allegedly extended under a new regime that could see manufacturers pay more for excise stamps.

Mr Wandayi called for an urgent probe on the system at a time the National Treasury is proposing to amend the pricing of excise stamps for alcoholic beverages and other products, a review that, if implemented, may increase the cost of stamps by up to 100 per cent.

"The proposed increase in the excise stamps cost raises a number of concerns including ownership of the Excisable Goods Management System," said Mr Wandayi on Tuesday in a statement.

He said his office has estimated the new system will generate over Sh162 billion scheme in the next 5 years.

"Based on the previous contract that put its proceeds at Sh81 billion in 5 years, these new costs will translate to Sh162 billion in 5 years," he said.

"This cost... will be borne by taxpayers since the cost will be passed on by manufacturers. The question is, why is the Kenya Kwanza Government abetting this and increasing the cost of goods for the poor 'hustlers' that they promised to give a lower cost of living?" he added.

Mr Wandayi asked the Office of the Auditor General Nancy Gathungu to immediately open an audit of all funds paid to KRA by manufacturers of excisable goods and account for how these funds have been utilised. He also wants the Auditor General to establish the identity of beneficiaries of the accrued funds and report their findings to the Public Investments Committee.

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"It is not clear if KRA has entered into a new contract with SICPA and when the new contract was advertised and awarded," said Wandayi.

"Question is, has KRA issued a new contract with SICPA? Has this contract been subjected to a tendering process in line with the Public Procurement and Asset Disposal Act... who is going to benefit from the over Sh162 billion scheme in the next five years?"

The SICPA system requires manufacturers to affix new-generation excise stamps on bottled water, juices, soda, energy drinks, non-alcoholic beverages, food supplements, and cosmetics.

The Standard could not immediately get a comment from the KRA and SICPA on these claims.

This is not the first time SICPA and KRA are getting into the crosshairs of Members of Parliament over the SICPA contract.

Former Auditor-General Edward Ouko on June 30, 2017, questioned the single sourcing of the Sh17.7 billion tender, which he said at the time was without justification.

Revenue stamps

He had said procurement of printing, supply and delivery of security revenue stamps complete with track and trace and integrated production accounting system from Sicpa Security Solutions was contrary to the Public Procurement and Disposal Act 2015 and KRA may not have received value for money on that contract.

In the National Assembly, MPs also raised issues over the projected revenue from the stamps supplied by SICPA following reports they would yield Sh3.6 billion a year, or Sh18 billion over the five-year contract period.

MPs noted that this was far below revenue that the Swiss firm would earn over the five years.

Manufacturers have in the past also warned that implementing EGMS entails capital expenditure in regard to the server room, data cables, retrofitting lines, signal exchange and electricity backups. Tax stamps, internet, and additional labour are among the running costs.

The system was adopted to facilitate production level monitoring of manufacturers and field authentication of tax stamps for goods, a move that KRA holds enables it to combat illicit production of goods and tax evasion.

EGMS implementation began after the Public Investments Committee and the courts cleared it.

When he appeared before the PIC, then KRA Commissioner-General John Njiraini, defended the system, saying it would help combat illicit goods and tax evasion.

"We know part of the reason why this issue has caused jitters is because when you put production line monitoring equipment, which then counts what is passing through the production line, there is a lot of concern. We know in a lot of quarters that we will be able to get rid of illicit production because that is exactly the strength we will have with this system," he said.