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Njiraini says EGMS will curb tax evasion as PIC probes graft claims

Njiraini told Parliament’s Public Investment Committee that the taxman is counting on technology to safeguard manufacturers from unfair competition by illicit traders/FILE

NAIROBI, Kenya, Aug 7 – Kenya Revenue Authority Commissioner General John Njiraini says those opposing rollout of the Excisable Goods Management System (EGMS) want to frustrate efforts to combat illicit production of goods and tax evasion.

Njiraini told Parliament’s Public Investment Committee that the taxman is counting on technology to safeguard manufacturers from unfair competition by illicit traders.

The EGMS enables production level monitoring of manufacturer operations and field authentication of tax stamps.

“We know part of the reason why this issue has caused jitters is because when you put production line monitoring equipment, which then counts what is passing through the production line there is a lot of concern. We know in a lot of quarters that we will be able to get rid of illicit production because that is exactly the strength we will have with this system. We will gather that information on real-time basis. You don’t even need to tell us. You cannot cheat us,” he said.

“If we do not control illicit production it means that someone produces 10 items and declares to us 1 or 2. We have a responsibility to collect revenue. I know that some of these concerns are related to the fact that people realise that we are getting to a point where technology will be able to deal with some of these issues,” said the KRA Commissioner-General.

KRA was last week forced to defer implementation of the system on bottled water and juices that was to commence on August 1, 2018 to a later date.

The EGMS system is designed such that details of each excise stamp appended on a product at the point of manufacturing are captured by the system at the time of printing and then tracked along the supply chain.

This came as PIC Chairman Abdulswamad Nassir (Mvita) said they had resolved to write to the Brazilian Embassy to get the accurate position on allegations that a former executive vice-president of the Swiss firm which won the bid to operate the system in Kenya is facing prosecution after he allegedly paid $14.5 million in bribes to secure a contract worth more than $1 billion in Brazil.

“As Parliament our due diligence will be now to write to the Brazilian authorities and ask them if there is anything like the Eighth Federal Court in Rio de Janeiro that has asked SICPA to provide their final submissions on this bid and how did this happen. Because these are the same people you went and sat with and they told you that this system is really, really good,” the PIC Chairman continued. “If they have been bribed they will say that the system is excellent, isn’t it?”

This is after Njiraini said that KRA has not seen the need to countercheck authenticity of the issue “because the revenue collection agency’s interest was in ensuring that it got the service it contracted for.”

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This after the Auditor General questioned the single sourcing procurement applied by the tax collection agency in awarding the Swiss Company SICPA Security Solutions SA Limited the Sh17.7 billion tender.

Njiraini told the Committee that KRA has been implementing new excise duty stamps since 2013 on cigarette, wines and spirits.

“Tax stamps were introduced in Kenya in 2003, initially on tobacco products. In 2007, coverage was extended to wines and spirits, a sector that had hitherto presented major challenges in tax management and public health risks due to illicit alcohol. The interventions in the alcoholic drinks industry have possibly had the most impact, particularly in appreciation of tax stamping,” he said.

The KRA chief defend the EGMS saying it has been pivotal globally in economies such in Chile and Brazil where it helps tax agencies in sealing loopholes and delivering consistent growth in excise revenue, besides deterring the proliferation of illicit production.

He denied claims that SICPA was single-sourced but MPs Rashid Kassim (Wajir East) and Joshua Kutuny (Cherangany) kicking off a storm over the projected revenue from the stamps supplied by SICPA which would reportedly yield Sh3.6 billion a year, or Sh18 billion over the five-year contract period.

Kutuny stated that the estimated revenue that the Swiss firm would earn over the five years of the tender is Sh81 billion, but his query over where the difference went answered.

PIC is investigating the procurement and award of the Sh1.50 per stamp tender which manufacturers of water, soda and fruit juices have opposed.

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