Leverage on tax stamps to curb tax evasion

The Kenya Revenue Authority (KRA) recently hosted the 2018 Tax Stamp Forum.

At the forum, important exchanges took place touching on the latest developments in tax stamp technologies and how these can be leveraged to help governments and society at large address challenges associated with counterfeit trade in products that pose risks to society and to tax revenues.

It is clear from recent experiences across the world, that digital technologies provide governments, businesses and society generally, with potent tools that can help combat retrogressive practices including illicit trade and tax evasion.

Tax stamps constitute an important component in this digital revolution by not only providing visual evidence of authenticity, but also by offering easy to use authentication mechanisms that can readily empower the general public to join public enforcement initiatives.

Kenya has made strides in the utilisation of tax stamps in the fight against illicit trade and tax evasion. Tax stamps were first introduced in Kenya in 2003 initially covering tobacco products alone. In 2007, coverage was extended to wines and spirits, a sector that had hitherto presented major challenges in tax management but also in the form of public health risks associated with illicit alcohol. In the process of using tax stamps, Kenya has learnt a number of lessons that may serve as useful experience for other developing countries. 

While tax stamp technology is now well developed, its effectiveness especially in combating tax evasion, depends to a large measure on the extent to which, such technology is infused into other tax compliance processes.

There is need therefore to look at tax stamp systems not in isolation but as part of the holistic process of addressing tax compliance, and hence as part of the wider technology infrastructure built to support tax compliance.

The present practice where tax stamp systems are developed as standalone platforms, may not in the long run effectively deliver the kind of holistic solutions required for tax administration. After all, detecting evasion of excise taxes without having commensurate interventions to address other tax streams equally affected is not only narrow minded but also possibly as well self-defeating.

There is therefore a case for strong partnerships between existing tax system developers and those involved in developing tax stamp systems, in order for full value to be delivered to customers.

Going forward KRA intends to deepen its relations with key players in the excise product control chain including the WHO through the FCTC Protocol which calls for implementation of global track and trace systems for tobacco products.

John Njiraini, KRA Commissioner General