29 August 2017

Kenya: KRA Turns Spotlight on Non-Alcoholic Drinks Segment

Manufacturers of non-alcoholic beverages in Kenya will be required to affix excise duty stamps on their products as the government rolls out a system to broaden tax compliance.

The Kenya Revenue Authority (KRA) expects juice and bottled water manufacturers and importers to have the excise duty stickers displayed starting October 1.

Kenya has witnessed a proliferation of bottled water and ready-to-drink juice vendors. Most of the vendors do not pay taxes.

Only 186 bottled water manufacturers and 28 carbonated soft drinks/juices manufacturers licensed by KRA pay tax.

While the taxman contends that the excise duty stickers are designed to fight trade in illicit goods, protect the public from unregulated products and boost tax revenue, there are concerns it could trigger price increases as manufacturers pass on the cost to consumers.

This is based on the fact that under the new regime, all juices, flavoured water and non-alcoholic beverages will attract $0.005 per stamp.

The excisable goods management system (EGMS) is meant to track and trace revenues from manufacturers. The system, which was introduced in 2013, was first implemented on tobacco, wines and spirits, with the taxman realising over $57 million more in annual revenue.

The KRA says that beer and tobacco have emerged as the top contributors of excise tax revenue due to enhanced compliance brought about by the EGMS, growing by an average of 14 per cent over the past four years.

Revenues from spirits, in particular, have continued to increase significantly rising by 22.7 per cent in the 2016/17 financial year.

Benson Korongo, a KRA commissioner in the domestic taxes department, told The EastAfrican that the authority will roll out the second phase, targeting non-alcoholic beverages in order to reverse the poor tax compliance.

In Kenya, as many as 60 per cent of juice and water brands are counterfeit. Last year, Kenya Bureau of Standards suspended the licenses of 368 bottled water brands for failing quality tests.

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.

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