KAM Raises Concerns Over Increase of Exercise Stamp Fee

Kenya Association of Manufacturers (KAM) has raised concerns over the gazettement and implementation of Legal Notice No. 30 of 2023 titled: The Excise Duty (Excise Goods Management System) (Amendment) regulations 2023 that is set to increase the rates of excise stamp fees for bottled water, juices and any other non-alcoholic drinks, cosmetics, alcoholic beverages, tobacco and nicotine products and export products. 

KAM has stated that according to the public participation Forum of the first of February this year, there was an objection to the increase in the cost of EGMS stamps for the above-listed products. 

“KAM and other business associations attended a public participation forum convened by Kenya Revenue Authority (KRA) and The National Treasury on the above subject matter on. this. We are deeply concerned that despite the public participation engagement, none or part of our submission was considered, and the legal notice is a replica of the proposals published. During an engagement with the stakeholders present on 1^st February 2023, we unanimously objected to the proposal published to increase EGMS stamps for the above-listed products,” KAM said in their statement to the media.

The increased EGMS stamp fees up to levels of over 100% and beyond the current market costs of producing the stamps shall have a detrimental effect on consumers and manufacturers due to the increased cost of production and the cost of finished products.

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They said it is unfortunate that it will be passed on to the consumer amidst the rising cost of living.  

The increment comes barely five months after a 6.3% inflation adjustment on specific excise tax rates was effected on 1 October 2022, impacting cosmetics, confectionary, alcoholic and non-alcoholic beverages including bottled water, and tobacco and nicotine products, among other products. Three months before the inflation adjustment, there was an increase in excise taxes from 1 July 2022, by between 10% and 20% through the Finance Act, 2022.  

KAM has insisted that the government needs to enhance tax predictabilityto spur investments and growth. Tax predictability earns investor confidence in the country, leading to increased local and foreign investments. Sudden changes in fiscal policy and regulations divert the industry’s resource allocation from productivity to meeting the costs associated with changes toward fast compliance. 

The EGMS excise stamp is a revenue assurance tool that was initiated to deter counterfeiting, ensure traceability of excisable goods along the supply chain, enable accounting to produce excisable goods manufactured or imported, and facilitate any persons in the supply chain to authenticate the stamps and excisable goods. As such the new EGMS stamp fee increase is a revenue collection mechanism as opposed to an assurance tool. 

Additionally, KAM has also raised concerns that there will be an increment to most counterfeited items in Kenya which will further encourage the counterfeit and illicit trade stating that it will deny government revenue and put the lives of Kenyans at risk as substandard and highly dangerous goods infiltrate the market. 

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“It is paramount that we make cost comparisons with other countries, regionally and globally, to ensure the country remains competitive. From our analysis, Kenya’s cost is amongst the highest in this regard with the price of stamp and its administrative requirements costing the same as the price of the product (see table below for EAC countries). This continues to make Kenya uncompetitive as an investment hub,” they stated.

Source: Gazette Notices from EAC Partner States 

“We also urge the Government to finalize and implement the National Tax Policy, with a focus on enhancing certainty and predictability in the tax code,” they added.