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Excise stamps to increase cost of business, says KAM

Fred Aminga @faminga

The anticipated use of electronic goods management system (EGMS) on juices, water and cosmetic products has put Kenya Revenue Authority (KRA) on the spot as manufacturers say they will pass extra costs to consumers.

Manufacturers also say setting up the system has additional costs, some of which cannot be justified, urging government to reconsider the new regulations which was supposed to be effective August 1, but was postponed by KRA.

Appearing before the Parliamentary Investment Committee yesterday (PIC) members of the Kenya Association of Manufacturers (KAM) requested that the new regulations be revoked for increasing the cost of doing business in the country.

The recent installation of the system has seen increase in costs related to setting up the production line to accommodate the new system whereby KRA is only providing the cost of machinery.

“The proposed costs will render manufacturers uncompetitive because of the additional costs of production,” said KAM vice chair Mucai Kunyiha.

The manufacturers argued that it is impossible to fix stamps on some products like water and cosmetics due to their shapes and sizes.

The new regulations say that the EGMS system comprises excise stamps, a track and trace system, production accounting system and related software and hardware.

The stamps can either be digital stamps, paper stamps or a mark that the Kenya Revenue Commissioner may approve to be affixed or printed on excisable goods.

While the cost of the stamp for each category of goods has been set out in the Excise Duty (EGMS) Regulations of 2017, manufacturers say that the stamp should be considered as an addition to the Excise Duty tax payable under the Excise Act.

“This means they are paying again for these stamps making it double taxation,” Mucai said, adding that the cost is derived from the cost of the ink and stamps.

The manufacturers took issue with the fact that while excise duty was meant to deal with counterfeits, a third party is in charge of collecting the funds despite there being an anti-counterfeit authority.

The manufacturers were also concerned with arbitrary increases in the cost of excise stamps.

“Examples of this are on cigarette products which were discriminately increased from Sh 1.50 to Sh2.80. This amounted to an increase of 87 per cent, which is unprecedented and it pushed our cost of compliance to Sh351 million in 2017, ” said British America Tobacco government affairs manager Victoria Kaigai, adding that there has been a surge in illicit cigarettes.

They called for the suspension of the Regulations No. 53 of 2017 by the National Assembly to allow for further and productive consultation.

The Customs and Excise (EGMS) Regulations 2013 introduced the provisions on EGMS which required all excisable goods except motor vehicles to be affixed with excise stamps. The implementation of the same commenced with the tobacco and alcohol manufacturing sectors.

But in March last year, the National Treasury published in the Gazette Regulations known as the Excise Duty (EGMS) Regulations of 2017 (Legal Notice No. 53). This move basically revoked the 2013 regulations.

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