The beleaguered Switzerland based excise stamp technology provider, SICPA is on the radar of detectives over questionable tax exemptions said to have been controversially extended by their client, the Kenya Revenue Authority (KRA) amounting to hundreds of millions, The Informer Media Group has established.
The multi-pronged probe set to be undertaken by a multi-agency team comprising of officers drawn from the Directorate of Criminal Investigations (DCI), Financial Reporting Center (FRC) and the Assets Recovery Authority (ARA) is said to have profiled SICPA officials, senior KRA officials including former officers at the helm of the taxman’s leadership who have since exited and officials from the National Treasury.
“Yes, some tax dues were exempted, we are going to establish how that was done.” Our source intimated.
The new revelations come against the backdrop of raging controversy over the extension of Sh17billion excise tax stamps supply contracts between KRA and SICPA Security Solutions SA.
This has exposed KRA and SICPA to a new storm over a multi-billion service contract to monitor the production of cold beverages such as beer and soft drinks.
Last week, the National Assembly Minority Leader Opiyo Wandayi questioned the manner in which the multi-billion contract was executed and allegedly extended under a new regime that could see manufacturers pay more for excise stamps.
He called for an urgent probe on the system at a time the National Treasury is proposing to amend the pricing of excise stamps for alcoholic beverages and other products, a review that, if implemented, may increase the cost of stamps by up to 100 per cent.
“The proposed increase in the excise stamps cost raises a number of concerns including ownership of the Excisable Goods Management System (EGMS).” Wandayi.
He said his office has estimated the new system will generate over Sh162 billion scheme in the next five years.
“Based on the previous contract that put its proceeds at Sh81 billion in 5 years, these new costs will translate to Sh162 billion in 5 years. This cost will be borne by taxpayers since the cost will be passed on by manufacturers. The question is, why is the Kenya Kwanza Government abetting this and increasing the cost of goods for the poor ‘hustlers’ that they promised to give a lower cost of living?” Wandayi posed.
The Minority Leader called upon the Office of the Auditor led by General Nancy Gathungu to immediately open an audit of all funds paid to KRA by manufacturers of excisable goods and account for how these funds have been utilised.
He also wants the Auditor General to establish the identity of beneficiaries of the accrued funds and report their findings to the Public Investments Committee.
KRA in 2013 contracted the Swiss firm to supply 3.5 billion excise stamps to be affixed on beer, wines and spirits and tobacco. The scope was in 2015 expanded to cover all excisable goods except motor vehicles and KRA directly procured SICPA to provide 12.8 billion stamps.
In 2018, the National Assembly heard that KRA signed a Sh17 billion excise tax stamps supply agreement with SICPA without any provisions for compensation in the event of a breach of the contract, Parliament heard yesterday.
Members of Parliament described the contract for the supply of Excisable Goods Management System (EGMS) with SICPA Securities Solutions as skewed and asked the then Solicitor- General Ken Ogeto to explain how it was approved.
Shockingly, revealed that the contract only ties KRA and not SICPA to make reimbursement in the event of partial or full termination of the contract.
“The contract states that in the event of partial or full termination and if KRA is in default, the authority shall reimburse SICPA within 30 days all reasonable investments and expenditure made by SICPA,” Ogeto said while reading a clause in the contract.
The contract document, however, does not obligate SICPA to pay KRA in the event it breaches the contract. KRA awarded SICPA the contract in 2013 and in 2015 expanded the scope through single sourcing.
Former Auditor-General Edward Ouko on June 30, 2017, questioned the single sourcing of the Sh17.7 billion tender, which he said at the time was without justification.
He had said procurement of printing, supply and delivery of security revenue stamps complete with track and trace and integrated production accounting system from SICPA Security Solutions SA was contrary to the Public Procurement and Disposal Act 2015 and KRA may not have received value for money on that contract.
The system was adopted to facilitate production level monitoring of manufacturers and field authentication of tax stamps for goods, a move that KRA holds enables it to combat illicit production of goods and tax evasion.
EGMS implementation began after the Public Investments Committee and the courts cleared it.
When he appeared before the PIC, then KRA Commissioner-General John Njiraini, defended the system, saying it would help combat illicit goods and tax evasion.
“We know part of the reason why this issue has caused jitters is because when you put production line monitoring equipment, which then counts what is passing through the production line, there is a lot of concern. We know in a lot of quarters that we will be able to get rid of illicit production because that is exactly the strength we will have with this system,” he said.
