Treasury suspends digital tax plan to address firms’ anxiety

The Treasury has stopped the Kenya Revenue Authority (KRA) from implementing a digital tax system for excisable goods, pending the conclusion of consultations with manufacturers who have opposed the system.

Treasury Secretary Henry Rotich and KRA Commissioner General John Njiraini said the implementation of the Sh17.7 billion Excisable Goods Management System had been put on hold to allow the concerned parties to address the issue of costs.

Mr Rotich and Mr Njiraini appeared before the Public Investment Committee to shed light on the procurement of the system which will see manufacturers of soft drinks, water and juice pay additional Sh1.50 stamp duty to be affixed on each of the products.

“When manufacturers and other industry players raised the issue of costs, we discussed with the Treasury and decided to put on hold the roll-out of the e-tax stamps on bottled water, sodas and other juices,” Mr Njiraini told the committee, chaired by Eldas MP Adan Keynan.

Mr Njiraini said the EGMS will, however, continue to apply for beer, cigarettes and wines, which have been stamped from 2003.

“We have put on hold the rollout of the EGMS to bottled water, juice and sodas, pending consultations.
“The issue of cost is now being addressed,” he said.

Mr Keynan had sought to know whether the KRA continues to implement the project despite protests from manufacturers.

“As the Cabinet secretary, you have indicated that you are reviewing the costs of the stamps. Will this mean putting a stop to certain aspects of the project implementation and whether that will not lead to other cost variations?” asked Mr Keynan.

Mr Rotich told the committee that the Treasury had listened to the concerns of the industry and was coming up with a pricing model that will see products such as water and soda pay different stamp costs while high-end drinks, such as beer and wine will pay more.

“It is a very fair concern coming from the manufacturers and industry players. We will be issuing regulations to address low cost product and new stamping charges. We have not had revenue shortfall on category of excise duty with the implementation of EGMS,” he said.

Mr Rotich said the Treasury continues to engage the industry players in order to resolve any outstanding concerns.
“With expansion of goods, stamping cost has created a challenge for low-cost items like sodas and juices whose prices are lower than those of beer and cigarettes. We are in contact with KRA to see how to deal with this matter,” he said.