KRA eyes new excise tax system amid Swiss firm tender dispute

Times Tower Building in Nairobi which hosts Kenya Revenue Offices. [Wilberforce Okwiri, Standard]

The Kenya Revenue Authority (KRA) has issued a fresh tender for a multi-billion-shilling service contract to monitor the production of cold beverages such as beer and soft drinks. 

The move comes at a time the National Treasury has proposed to amend the pricing of excise stamps for alcoholic beverages and other products. If implemented, the review may increase the cost of stamps by up to 100 per cent

It also comes weeks after the taxman and Swiss firm SICPA Security Solutions SA, which had been running the Excisable Goods Management System (EGMS) contract, recently came under the spotlight over the management and grounds for extension of the contract. 

KRA said yesterday interested firms have exactly two weeks to submit their bids. 

"KRA is inviting Expressions of Interest from suitable qualified bidders with appropriate experience in implementing an Integrated Excisable Goods Management System (EGMS), preferable in a revenue administration environment," said KRA in tender documents. 

"The completed expression of interest and accompanying documents must be saved as PDF documents marked with the relevant tender description and submitted to the appropriate KRA E-procurement Web Portal found on the KRA website so as to be received on or before April 25, 2023 at 11.00 am." 

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

Swiss firm SICPA, which has operated the system for over a decade, beat Ukraine's Edaps Consortium, India's Holistik India Ltd, Madras Security Printers Ltd and Security Printing Press, British firm De La Rue Currency and Security Print as well as Authentic Inc from the United States to clinch the lucrative tender.

According to KRA, the initial SICPA contract was signed on April 18, 2013, for a period of five years.

The contract was terminated on October 30, 2015, when a new five-year term contract was entered into between KRA and SICPA. 

"Subsequently, two addendums to the 2015 contract have since been executed, a first addendum dated May 4, 2021 and a second addendum dated December 23, 2022," explained KRA recently in a submission to the National Assembly’s Departmental Committee on Finance and National Planning.

The committee had questioned how the multi-billion-shilling SICPA contract was executed and allegedly extended under a new regime that could see manufacturers pay more for excise stamps. 

Minority leader Opiyo Wandayi had also called for an urgent probe into the system. 

This came as manufacturers warned the proposed increment in the EGMS stamp fees would hurt consumers and manufacturers "due to the increased cost of production and the cost of finished products amid the rising cost of living."  

“The proposed increase in the excise stamps cost raises several concerns including ownership of the Excisable Goods Management System,” said Mr Wandayi. 

He had said his office estimated the new system would generate over Sh162 billion in the next five years. 

“Based on the previous contract that put its proceeds at Sh81 billion in five years, these new costs will translate to Sh162 billion in five years,” said Mr Wadayi. 

“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. 

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. 

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 the revenue that the Swiss firm would earn over the contract period.  

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