Kenya Revenue Authority (KRA) has rolled out a new generation of excise stamps for excisable goods as part of its strategy to continuously review and improve the security features of excise stamps to deter counterfeiting. The excisable products covered include alcoholic beverages, tobacco and tobacco products, water, soft drinks and juices. KRA informed key stakeholders in the excise industry including all manufacturers, importers, distributors, wholesalers and retailers of excisable goods, of the rollout through a public notice published on 30th November 2021.
The introduction of the new excise stamps is in line with the provisions of the Excise Duty (Excisable Goods Management System) Regulations, 2017 that requires all excisable products manufactured in or imported to Kenya, with the exception of motor vehicles, be affixed with excise stamps.
The new generation stamps have enhanced security features leveraging on technology which are meant to deter counterfeiting. The security features that can be verified using stamp verification tools provided to enforcement officers. Members of the public can also verify the stamps using the Soma label mobile phone app available on Google Play Store or Apple Store.
The rollout will be implemented in three (3) phases with the first one targeting wines, spirits, ready to drink beverages, beer and other tobacco products. Water, soft drinks and juices will have the new stamps from 28th December 2021, whereas tobacco products and keg beer will be covered from 1st February 2022. A user guide on this is available on the KRA website.
The excise sector accounts for 6.6% of ordinary revenue collections in VAT, Excise and other taxes. This is therefore a critical sector for revenue mobilization. In the last financial year, KRA collected KSh. 62.409 Billion of Domestic Excise Revenue against a target of KSh. 62.148 Billion, translating to a performance of 100.42%.
KRA has identified various tax evasion schemes that have been utilised by some taxpayers in this sector which include: use of counterfeit excise stamps on excisable products, sale of excisable goods without stamps, sale of vatable goods without issuance of a proper tax invoice, manufacturing of excisable products without excise licenses and use of proxy companies to procure raw materials.
Other schemes identified include; under declaration of production, failure by manufactures to account for excise stamps, production of fake delivery notes, issuance of invoices with fake Personal Identification Numbers (PIN), and conveying of illicit goods using various modes of transport to aid concealment of the source and ownership of the goods.
Over the last five years, KRA has estimated revenue lost from tax evasion in the sector to be approximately KSh. 70.3 Billion, denying the country the much needed revenue for financing national economic development programmes.
To deal with the above challenges, KRA has put in place measures and interventions to monitor, reform and enhance revenue collected from the excise sector.
- Enhanced market surveillance on all excisable products in the market.
- Adoption of multi-agency approach in fight against illicit trade.
- Enhanced gathering and management of tax intelligence to improve revenue monitoring and protection.
- Robust investigation and prosecution of suspected entities engaged in any form of illicit trade and tax evasion
- Establishment of a whistle blowing framework and channels that allow members of the public to share information on illicit trade activities and other tax evasion schemes.
- Investment in technology such as Excisable Goods Management Systems, Electronic Cargo Monitoring System and other systems to enhance the fight against illicit trade and tax evasion.
- Strengthened strategic partnerships with market leaders and key stakeholders in the private sector.
- Enhanced management of borders to combat illicit cross-border trade.
KRA calls upon all manufacturers, importers, distributors, wholesalers and retailers of excisable goods to support the rollout process and the fight against illicit trade.