KRA targets manufactures of bottled water, juice, cosmetics in excise duty collection

Kenya Revenue Authority (KRA) has said it will extend its Excisable Goods Management System (EGMS) application aimed at increasing domestic excise revenue collection.

“With effect from 1st November 2017, all the affected goods manufactured and imported into Kenya shall be affixed with excise stamps in accordance with the regulations,” KRA said.

This will affect manufacturers of non-alcoholic beverages, food supplements other non-alcoholic drinks, food supplements and cosmetics.

The affected goods manufactured or imported into Kenya shall be affixed with excise stamps from the effective date.

The stamp will deter counterfeiting, facilitate tracking of the stamps and excisable goods, and enable accounting for the production of excisable manufactured or imported goods.

In June 20th, KRA published a list of 519 licensed manufacturers and importers of excisable goods and beverages who will now be required to facilitate KRA technical teams to access their production lines for purposes of determining installation requirements and comply with the guidelines for system installation on each production line.

The introduction of stamps under EGMS is aimed to combat illicit trade, seal revenue loopholes and boost collection.

Excise duty in the last two financial years hit KES 139.54Bn and KES 165.47Bn representing 12.10 percent and 12.67 percent of the ordinary revenue collection, respectively.

The EGMS has Quick Response Codes which are security features that allow consumers, retailers and distributors using smart cellphones to query authenticity of the excisable goods.

Treasury raised KRA’s collection target for the fiscal year 2018/19 by 15.0 percent to Kshs 1.7 tn from the Kshs 1.5 tn target set for the current fiscal year, in a bid to reduce the fiscal deficit further to a projected 5.4 percent of GDP (6.3 percent in FY 2017/18, reduced from 8.9 percent in FY 2016/17).

The FY 2017/18 Budget Policy Statement highlighted measures that will improve collections, the main ones being: promotion of local industries, and encouraging FDI re-investments.

However, Cytonn Investments Analysts are of the view, “Despite the measures put in place, it will be difficult for KRA to meet its new set targets.”

“Since the operating environment in 2017 is more challenging due to:  low corporate earnings with the listed banking sector – a big tax contributor – recording a 13.8 percent decline in core earnings in H1’2017 as compared to a growth of 15.5 percent in a similar period last year, Increased layoffs that will affect the collections of PAYE, and uncertainty in the political environment that is expected to lead to foreign investors taking a wait-and-see approach in weeks leading up to the re-run of the presidential poll in October.”

Source: Genghis Capital, Cytonn Investments