Revealed: The Sh4.5 billion Swiss debt behind tripling of stamp tax

Times Tower

Times Tower, Kenya Revenue Authority headquarters in Nairobi. The state recently announced plans to collect Sh2.8 trillion in taxes from MSMEs.

Photo credit: File | Nation Media Group

A Sh4.5 billion debt owed to a Swiss contractor by the Kenya Revenue Authority (KRA) pushed the National Treasury to propose the tripling of excise stamp charges.

Business Daily has learnt that the debt to SISCPA, the Swiss company contracted to manufacture the stamps, is one of the main reasons that motivated the National Treasury to propose an increase in excise stamp taxes, that have jolted manufacturers who were expecting the cost of the stamps to drop by more than half, according to a new contract that KRA signed with the Swiss company.

National Treasury Cabinet Secretary Professor Njuguna Ndung’u told manufacturers at a closed-door meeting last week that the stamps had to be priced “correctly” to help KRA pay SISCPA the debt which the taxman had accumulated over the five years of the contract.

The Swiss company was awarded the contract on the Excise Goods Management System (EGMS) in December 2012, with the contract officially starting on October 30, 2015, when two parties signed a framework deal that would see SISCPA print, supply and deliver secure revenue stamps complete with track and trace.

SISCPA would be paid Eur 13.25 (Sh1,796), exclusive of value-added tax (VAT) for the stamps which would first be affixed on alcoholic products including beer, wine and spirits.

The enforcement of the EGMS was extended to non-alcoholic products such as cosmetics, fruit juice, and soda, in March 2021.

While manufacturers paid for the stamps, KRA was also expected to bear part of the cost, a situation that has seen it accumulate a lot of debt.

“Tax stamps are subsidized and KRA has an accumulated debt of Sh4.5 billion with the contractor…,” said a source who attended a meeting held last week between KRA and the Kenya Association of Manufacturers (KAM).

“The stamps have to be costed at the ‘correct’ price in order to pay off the debt that has accumulated and been impacted by inflation, exchange rate, depreciation of the Shilling etc,” the source said, explaining the reasoning of the National Treasury.

Read the rest of the article in Business Daily here