Kenya manufacturers say proposed excise duty stamps cost increment will root counterfeit trade

KENYA – Manufacturers in Kenya have warned that the proposed increase in the cost of excise duty stamps will spike trade in counterfeited spirits, cosmetics, water brands, and juices, hurting the country’s growth in taxes targeted by the Kenya Revenue Authority (KRA).

The Kenya Association of Manufacturers (KAM), the sector’s lobby, argued that the resultant increase in the cost of compliance —which will make Kenya’s excise stamps amongst the highest in the world— will be passed onto consumers of bottled water, juices, cosmetics, beer as well as spirits like whisky and gin.

The excise duty stamps affixed under the Electronic Goods Management System (EGMS) framework are a revenue assurance tool used to deter counterfeiting and ensure the traceability of excisable goods along the supply chain.

The stamps are affixed under the Electronic Goods Management System (EGMS) framework to help the taxman compute the excise due from manufacturers and importers.

The proposed increase, which would come into effect on March 1, 2023, would be up to levels over 100 percent and beyond the current market prices, which KAM believes will have a detrimental effect on both consumers and manufacturers.

KAM Chairman Rajan Shah said: “The proposed drastic increase in the cost of stamps seeks to be a revenue collection mechanism as opposed to an assurance tool. Impact Assessment with the industry needs to be conducted to ensure the country remains competitive.”

“We are afraid that such increment to some of the most counterfeited items in Kenya will further encourage counterfeit and illicit trade,” KAM chairman Rajan Shah said in a statement after meeting with KRA. This will deny government revenue and put lives of Kenyans at risk as substandard and highly dangerous goods infiltrate the market.”

The taxman first rolled out excise stamps on alcoholic drinks and cigarettes in 2013 before being affixed on bottled water, juices, soda in polyethylene terephthalate (PET) bottles, energy drinks, cosmetics, and food supplements in 2019.

This is the first review of stamp prices since 2017, with an estimated 2.9 billion stamps sold annually by the Kenya Revenue Authority.

The cost of a stamp affixed on a beer bottle will double to Sh3 from Sh1.50, while those for spirits, wines, and tobacco products are set for a 79 percent rise to Sh5 from the current Sh2.80 per stamp.

The firms also protested over the proposed amendment to the laws as aimed at changing the use of excise stamps from a “revenue assurance tool” to a “revenue collection mechanism”.

Shah noted that predictability earns investor confidence in the country, leading to increased local and foreign investments.

Sudden changes in fiscal policy and regulations divert the industry’s resource allocation from productivity to meeting the costs associated with changes toward fast compliance, he underscored.

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