Be prepared to pay more for bottled water, sodas
Consumers will have to dig deeper into their pockets for a bottle of soda, bottled water, juice, energy drinks and other non-alcoholic beverages effective November 13.
This is after Kenya Revenue Authority’s (KRA) announced yesterday that the products must be affixed with excise duty stamps by next month when the Excisable Goods Management System (EGMS) goes live.
Excise stamps are affixed on goods to indicate that tax has been paid before its sale.
KRA commissioner general James Githi said in a notice to the public, manufacturers, importers, distributors and retailers that products which will be in the market after November 13 without excise stamps shall be seized and offenders prosecuted.
“All bottled water, juices, energy drinks, soda and other non-alcoholic beverages manufactured or imported into Kenya prior to the go-live date will be allowed in the market without stamps until January 31, 2020,” he added.
Detering fakes
The affixed stamp will deter counterfeits and enable accounting for the production of excisable goods manufactured in or imported into Kenya.
Ernst & Young East Africa tax partner Francis Kamau said while the cost of bottled water, juices, energy drinks, soda and no-alcoholic beverages will go up, some manufacturers and importers have not been paying tax despite KRA imposing it on other items such as wines, mineral water and aerated water, cigarettes containing tobacco, spirits of alcoholic and fruit juices.
Michael Mburugu partner at PKF Consulting called the EGMS a fraud having been blacklisted in many countries.
“The typical structure of EGMS is such that it steals blatantly from poor people – excise tax is a consumption tax which means the consumers absorb the full impact – the tax incidence is on many poor Kenyans who consume water, juice, diapers and other basic consumables,” he said.
Besides the cost impact on the poor, EGMS architecture is purely designed to benefit a few offshore interests as opposed to collecting tax revenues to benefit the country.
Single sourcing
He warned that the system which was procured through single sourcing deserves investigations since the revenue structure of the EGMS is that the charges levied will benefit the supplier and not the government.
“Additionally, the EGMS structure does not provide for clarity on how to deal with insurance cover for the equipment installed at the manufacturers premises, how to deal with risks and complexities of compatibility with various operating systems already installed by manufacturers, how to deal with service level parameters to ensure no shutdowns are caused by the EGMS breakdowns and the lack of uptime guarantees,” he said.
“If the government is serious that the system is good for the country , they should publish the estimated tax to be collected using the EGMS vis a vis the fee to be exported to the foreign suppliers,” said Mburugu.
