Senators demand probe into missing 9 million KRA revenue stamps
The Finance and Budget Committee is expected to present its findings and recommendations to the Senate in the coming weeks.
Senators have called for an investigation into a suspected tax evasion syndicate operating within the Kenya Revenue Authority (KRA) following revelations of the disappearance of over nine million excise revenue stamps.
The lawmakers raised the alarm over the issue, arguing that the missing excise stamps signal a deeper problem within KRA. They called for an inquiry into whether a tax evasion ring had infiltrated the authority’s system, compromising the government’s ability to meet its revenue targets.
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Last Month, Auditor-General Nancy Gathungu raised concerns over the potential theft of 9.6 million excise stamps from KRA’s custody, sparking fears of tax fraud and the possible influx of counterfeit goods into the market.
Gathungu noted that the unaccounted-for revenue stamps may have fallen into the hands of tax evaders or illicit traders, exacerbating an already growing challenge in Kenya’s manufacturing sector which is struggling with an influx of counterfeit products.
In response, the Senate has tasked the Finance and Budget Committee with investigating the matter. The committee is expected to examine the unaccounted-for excise stamps which serve as a mark of quality assurance and address concerns over tax compliance and consumer safety.
Urgent action
Nominated Senator Miraj Abdillahi described the disappearance of the revenue stamps as a serious matter that warrants urgent action. She emphasised the need to investigate the existence of a tax evasion ring within KRA, warning that the issue threatens the government’s tax collection efforts.
“This incident raises critical concerns about consumer safety, public health risks, tax evasion and market integrity. Counterfeit duty stamps allow illicit trade to flourish, affecting not only the economy but also the well-being of Kenyans,” Miraj said.
She further urged the committee to identify those behind the scheme and recommend measures to prevent future occurrences.
“We want the committee to tell us the action that will be taken against the masterminds of the heist as well as any strategies to guard against repeats of a similar occurrence in future,” she said.
Mitigation measures
She also called on KRA to outline any mitigation measures it has in place to prevent system infiltrations that could result in the flooding of counterfeit goods in the Kenyan market.
Her sentiments were echoed by nominated Senator Hamida Kibwana, who questioned whether KRA had implemented any safeguards to detect and prevent tax evasion.
Excise stamps are essential for verifying tax compliance on excisable goods such as alcohol, cigarettes, soft drinks and cosmetics. However, counterfeit excise stamps have become a tool for tax evasion, allowing unscrupulous traders to circumvent tax obligations.
Between 2016 and 2021, KRA estimated that tax evasion in the excise sector led to a revenue loss of approximately Sh70.3 billion, denying the country much-needed funds for economic development.
To address counterfeiting, KRA introduced a new generation of excise stamps in 2021. These stamps feature advanced security enhancements leveraging technology to prevent forgery. The move followed concerns that previous excise markers, in use since 2003, were prone to counterfeiting.
Fake excise stamps
Despite these efforts, the taxman continues to crack down on traders using fake excise stamps.
The excise sector remains a critical component of Kenya’s tax revenue, accounting for 6.6 per cent of ordinary revenue collections.
In the financial year ending June 2024, KRA collected Sh276.7 billion in value-added tax, excise, and other taxes.
KRA collects an average of Sh60 billion annually in domestic excise tax, with revenues reaching Sh73.6 billion in the fiscal year ending June 2024. However, illicit trade remains a significant challenge, undermining local manufacturers.
Illicit goods, ranging from sugar to cigarettes, account for 40 per cent of all traded goods in the country. Some of these goods are imports that were originally intended for transit to neighbouring countries but were diverted into the local market without paying import duties.
Senators are now urging authorities to take decisive action against the alleged tax evasion syndicate and ensure that such incidents do not recur.
The Finance and Budget Committee is expected to present its findings and recommendations to the Senate in the coming weeks.
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