The validity of a tax management systems contract that the Kenya Revenue Authority (KRA) awarded a Swiss firm was thrown into doubt Tuesday after a procurement oversight agency told Parliament that it was based on fraudulent documents.
The National Assembly’s Public Investments Committee (PIC) heard that SICPA Solutions SA Limited, the firm in the eye of the storm, was awarded the contract three years before it was cleared to do business in Kenya.
The Public Procurement Oversight Authority (PPOA) told MPs that KRA awarded SICPA Solutions the Excisable Goods Management Systems (EGMS) contract in May 9, 2010, long before the company was registered on May 9, 2013.
Maurice Juma, the PPOA director -general said that in an ideal situation where such vital information surfaces after the award of a contract, the tender should be subjected to debarment proceedings.
“Under the procurement law, the contract was processed through fraudulent means and it cannot be sustained,” Mr Juma said. PPOA is the government agency responsible for regulation of procurement systems.
KRA is on the spot for single sourcing the Sh17.7 billion e-tax job to SICPA, which has been accused of corrupting tax agencies in Brazil, Albania, Morocco and the Philippines.
The committee is investigating a clause in the tender documents that requires companies manufacturing excisable goods to pay SICPA Sh1.50 for every stamp attached to each item – earning the Swiss firm billions of shillings every year.
Previously, the taxman targeted large consumers such as supermarkets and hotel chains for enforcement of EGMS. But the law has since changed and transferred the burden to manufacturers and importers of the goods.
Early this month, soft drink maker Coca-Cola said it would close shop and relocate its manufacturing plants to neighbouring countries if the taxman insists on levying the charge.
It is estimated that at the rate of Sh1.50 stamp duty imposed on every bottle of water, juice and soda, Coca-Cola would pay the Swiss firm between Sh8 billion and Sh11 billion annually.
Beer maker East African Breweries Limited (EABL) has also opposed the digital tax system, arguing that it imposed an unnecessary cost burden on its business.
EABL officials told Parliament early this month that KRA had already sent it a Sh300 million stamp bill arising from use of EGMS.
Mr Juma refuted claims that it was within the authority’s powers to stop illegal purchasing before it occurs, saying entities are not compelled to seek the opinion of PPOA on the preferred method of procurement.
Credit: Business Daily