Treasury downplays firms’ fears in new excise tax system

The National Treasury Cabinet Secretary (CS) has defended a new tax system set to start in September after soda, bottled water, juices, non-alcoholic beverages and cosmetics companies sued to stop its roll-out.

Firms including Kevian Kenya, Nuteez Peanut Butter maker Jetlak Foods, Delmonte, PZ Cussons EA, Kenafric Industries, Nivea products maker Beiersdiorf Eastafrica, L’Oreal and Ketepa had rushed to court last month over the Excisable Goods Management System (EGMS) tax system that is expected to help the Kenya Revenue Authority (KRA) net Sh3.6 billion more revenue.

While responding to the case, the CS insisted that the move aims to protect the firms and consumers from counterfeits.

“On account of its features, the EGMS solution enables KRA to meet its core objectives and further protects manufacturers and consumers from the ills of counterfeiting to their immeasurable benefits,” said the CS in suit documents.

The CS also denied allegations that the new system is riddled with inefficiencies and that its installation would affect manufacturing times as well as lead to loss of sales due to frequent breakdown.

The firms had sued the State as members of the association of manufacturers, importers, distributors and retailers claiming that roll-out of EGMS was done without consultation and lacked legal basis.

KRA has made it mandatory for all manufacturers to install EGMS in a move aimed at assisting the taxman track excisable products as well as seal tax evasion loopholes.

The disputed system is a security solution provided by Swiss firm SICPA Securities sol S.A.

While the petitioners want an order issued stopping implementation of the system, the CS told the court that such a directive would render irreparable losses to the S.A security firm.

High Court judge James Makau set the case for a hearing Thursday.