Manufacturers Fault KRA over Cost of Implementing New Excise Duty System

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Kenya Revenue Authority (KRA) declared Wednesday as the date its Excisable Goods Management System (EGMS) “goes live” and directed traders to adjust their products with the e-stamps despite a court order suspending them until a judgment is delivered on November 21. The EGMS is set to counter illicit trade and authenticate excisable goods to facilitate revenue collection.

Stakeholders in the manufacturing sector have expressed their dissatisfaction in KRA’s premature move that threatens the growth of the sector, which is the highest contributor to the tax revenues despite contributing only about 7.7 percent to the GDP currently.

According to the stakeholders, the cost of implementing the excise duty management system which should be borne by the government is borne by the manufacturers, yet for the longest time, they have held the position of government bearing the cost of tax collection. The cost of setting up the system put the additional cost to the manufacturer.

Commenting on the issue of additional taxes into the manufacturing sector in Kenya, Dr.James Mcfie a lecturer in Management Accounting and Financial Reporting and Analysis in Strathmore University, picked a case scenario of EABL’s Senator Keg to paint a picture of what could be consequences of KRA’s actions.

“I remember when Senator used to cost Ksh 20 a glass, but then CS decided to put a Ksh 20 tax on that glass. People went for Changaa as the alternative and we had an incredible outburst of people dying. That Increase from Ksh 20 a glass to Ksh 40 a glass led to the closure of 9000 bars. The CS wanted to raise Ksh 6 Billion in taxes but never raised it.

“EABL decided it will stop producing Senator.  In volume terms, it was the biggest selling beer in Kenya it was for the mwananchi. Farmers producing sorghum for EABL could not sale because they lacked market. The point here really is we got to think about the consequences of our actions. We are becoming uncompetitive and we are going to kill the manufacturing industry in Kenya if we do what these people are suggesting,” he said.

Already a lot of issues have not been addressed by the system, as there is fear that the rollout is going to be a bottleneck. About the cost of implementing the system, KRA has been redirecting the matter to the National treasury saying its the only one that can handle the matter.

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