Water bottlers stare at thirsty times in KRA push for revenue

Kenya Revenue Authority (KRA) Deputy Commissioner on Policy Caxton Musudi (left) and domestic taxes department commissioner Elizabeth Meyo during a media briefing on the on implementation of EGMS on November 8, 2019. PHOTO | SALATON NJAU | NMG 

By EDWIN OKOTH
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Summary

• The companies, which supply drinking water to household dispensers, are part of those targeted to have excise stamps affixed on each bottle they sell.
• They will, however, find it difficult to comply due to their automated production lines and lack of licenses.
• KRA hopes to bring more businesses into the tax bracket while eliminating trade in illicit products.

Water vendors mostly based in residential areas and several other bottlers may be run out of town as the Kenya Revenue Authority pushes for compliance with payment of excise stamps.

The companies, which supply drinking water to household dispensers, are part of those targeted to have excise stamps affixed on each bottle they sell.

They will, however, find it difficult to comply due to their automated production lines and lack of licenses.

In five days’ time, all bottled water, juices, energy drinks, soda and other non-alcoholic beverages manufactured in or brought into Kenya will have to affix excise stamps that KRA only gives to licensed manufacturers.

KRA Commissioner for Domestic Taxes Elizabeth Meyo said over 130 manufacturers and importers of bottled water, juices, soda, energy drinks and other non-alcoholic beverages had registered in the Excisable Goods Management System in readiness for the rollout next week.

“The bottled water vendors commonly known as water ATMs may find it difficult to comply due to the nature of their operations but we are willing to help them comply. All they must know is that we are not going to allow anyone operate outside compliance from November 13th as it will be unfair to others who have complied,” Ms Meyo said in Nairobi yesterday.

KRA hopes to bring more businesses into the tax bracket, eliminate trade in illicit products and harvest some Sh4 billion in tax by expanding the EGMS system introduced more than three years ago.

Compliance by bottled water manufacturers has been below 30 percent hence the plan to seal the loophole, which has been exploited for several years by hundreds of bottled water firms to mint millions of shillings without paying taxes.

There are currently 403 licensed bottled water firms and 42 licensed manufactures of juices, soda and other non-alcoholic beverages. Only 64 of these firms have automated systems ready for the real-time fixing of stamps which is linked to the KRA systems to tell production volumes as they happen.

The rest are yet to have such automated system, signaling the possibility of either slow roll out or compliance loopholes when the system kicks in after being postponed a number of times including the September 2019.

Beer, wine, spirits and tobacco have been on a similar tax compliance regime with KRA since 2015 with several firms having shut down when the system began. There are just over 20 alcohol manufactures operating now, down from 177 when the excise tax compliance regime was rolled out.

Ms Meyo said there should not be any significant jump in the prices of bottled water and juices whose additional cost of excise stamps will be just 50 and 60 cents respectively.

Manufacturers who had decried compliance cost of having their production lines configured to incorporate the stamp fixing machine, threatened to pass the cost down to the consumers to make the products ‘prohibitively expensive for the common man’, claim KRA disputes.

With the excise stamps, KRA will now be able to identify the non-complying products even in the market and a confiscate them.