Business Daily (Nairobi)
Zeddy Sambu
8 October 2007
Nairobi — Kenya Revenue Authority has refuted claims that it is to blame for the looming shortage of petroleum products in the country.
Contrary to claims by oil marketers that the shortage is the result of the hurried introduction of a new tax system, the taxman said he had crafted a watertight plan to ensure a smooth transition, including training the marketers on the new system.
Under the programme, marketers were supposed to declare stocks that were accessible to them in the Kenya Pipeline system two months ago. They were also required to reconcile volumes that were being lifted against what had been paid for and released before September 1.
KRA said failure by the marketers to implement these steps was the main cause of the impending shortage that has already started being felt in some areas.
"Several meetings were held with oil companies, with the final one on September 27, prior to the full roll out of the new system on October 1," KRA's Commissioner for Customs Services Wambui Namu said.
With the latest reforms, KRA is replacing a manual tax collection system with the Customs Oil Stock Information System (COSIS) -a move it says will enable it realise its tax targets for the petroleum sector.
Mrs Namu said revenue from dry cargo continues to perform above the projected levels while the petroleum sector had consistently under performed.
Between Januaryand March, for instance, the sector realised only 87 per cent of the target. In fiscal year 2006/07 oil revenues were at 93 per cent against set performance targets by the authority.
Lack of concerted efforts with the marketers and the authority, she said, has led to many cases of dumping transit products in the local market and subsequent revenue risks, especially after KRA pushed lifting points of transit products from western to Nairobi and Mombasa- under the East African Customs Protocol.
However, Mrs Namu said prethere had been delays by some of the oil marketers to provide stocks balances as at September 30 for KRA to update in COSIS. "This delayed the loading of trucks, prompting imminent shortages in various parts of the country," she said.
She, however, reassured the marketers and consumers that the matter had been addressed.
COSIS offers real time inventory monitoring system that allows oil marketing companies to lift petroleum products only if they have a positive stock balance in the distribution system.
A number of oil marketers interviewed by the Business Daily warned that the country could face a fuel crisis, as the new tax filing system was facing a lot of teething problems.
"We are facing a serious loading problem because the new system was not tested before official launch," said Mwaura Ngaari, the external affairs manager at Kenya Shell. Mr Ngaari warned that the consumer market could face an acute shortfall in oil products in coming days.
A spot check by the Business Daily across oil depots in Nairobi indicated that loading of petroleum products was moving at a snail's pace with some marketers such as Shell not having moved a single product from its depots since Monday.
Mr Ngaari urged the taxman to delay implementation of the system until all players become familiar with its workings.
KRA however insisted that there was no turning back on implementation of the system, setting the stage for a replay of the spat that pitted it against oil marketers during implementation of the upfront payment of taxes by oil firms in 2005.
On Friday, the industry's lobby Petroleum Institute of East Africa (PIEA) was seeking talks with the KRA commissioner in charge of customs to plead for delay in implementation of COSIS.
"We are not against its implementation but we are asking for more time for its proper implementation," said George Wachira the general manager of PIEA.
The procedures provides for transit products to be pumped over in bulk after the on-line registration and approval of a Transit Entry, supported by a Security Bond. Similarly, at the time of lifting for export, an on -line Transit Entry is registered by the oil marketers for customs approval before final release on a truckload basis.
For products destined for local consumption, oil marketers are required to register on-line entry and pay taxes before the products are released from the storage area.
Legal amendments effected in August 2005, paved way for up front payment of taxes and adequate security bonds for both local or transit products before deliveries from the three designated storage points -Kipevu Oil Storage Facility, Kenya Petroleum Oil Refineries or Shimanzi Oil Terminal.
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