More than half of excisable products in the market may be illicit or non-compliant, the Kenya Revenue Authority (KRA) has said, even as it sets its eyes on potentially doubling the number of excise stamps on consumer goods, including beer, soda, cosmetics, cigarettes, and bottled water.
‘Current assessments indicate that over 50percent of excisable products may be illicit or non-compliant, resulting in significant revenue leakage and market distortion,’ KRA said as it kicked off the recruitment of a new security firm to provide stamps for its Excisable Goods Management System (EGMS).
Kenya has, since 2003, affixed excise stamps on excisable goods to track the goods across the value chain and seal revenue leakages.
The country’s excisable goods market comprises over 1,800 manufacturers and 1,200 importers. Bottled water producers dominate the scheme, with 1,659 plants covered, followed by soft drinks and juices manufacturers with 100 units, and spirits and beer manufacturers with 36 and 13 units, respectively.
Some 1,218 importers are also covered under the excisable goods scheme, including 300 dealing in wine, 282 in spirits, soft drinks and juices (243), and beer (170).
The taxman stated that approximately 3 billion excise stamps are currently issued annually; however, market intelligence suggests a potential for over 6 billion legitimate stamps once the illicit market is formalised.
KRA said it targets a new EGMS that would heavily deploy technology, including AI-driven analytics.
‘KRA therefore requires a comprehensive EGMS that incorporates the highest levels of security, serialisation, geospatial intelligence, IoT integration, cyber-resilience, and AI-driven risk analytics,’ it said.
Kenya’s first phase of the excise stamps regime saw the stamps affixed on tobacco. In 2007, the government expanded the scope of the stamps to include wines and spirits.
In 2012, KRA introduced the track- and- trace system through the EGMS. This initially covered only tobacco, wines, and spirits.
At the factory level, EGMS enables KRA to tally and tag all products with a unique electronic code that enables subsequent tracking of the product in the market.
Swiss security printer Sicpa SA has been supplying excise stamps to KRA. Sicpa was first handed the EGMS contract in 2015 for the supply of excise stamps for both alcoholic and non-alcoholic beverages, with a minimum of Sh15.9 billion and a maximum of Sh17.1 billion.
The terms of the contract were based on a time factor, subject to the achievement of 12,876,633,889 stamps of the contract period of five years, whichever came first.
The contract for the EGMS expired in July 2022, but KRA was forced to stick with the Swiss firm pending the clearance of a debt estimated at about Sh4billion.
Under the contract, Sicpa prints and supplies excise stamps complete with a track and trace system. It also includes the delivery of an integrated production accounting system.
An official document seen by Business Daily showed that Sicpa SA was, on August 14, 2024, awarded a symbolic Sh1,010 deal to supply the taxman with excise stamps for a year until August 14, 2025. The contract was awarded through a direct procurement arrangement.