Nairobi – East African Community states are seeking common rules to tighten supervision of customs warehouses and stem tax evasion. 

Kenya’s Treasury Cabinet Secretary Henry Rotich said there were differences in the warehousing regimes in the region that make it difficult to enforce best practices, thereby leading to revenue leakages.

This was one of the issues discussed by the Kenya Treasury and the International Monetary Fund (IMF) on the administration of taxes. An IMF delegation was in Kenya from December 2-16 to review economic developments.

"We are looking at the warehousing regimes where the countries in the region are going to agree on a unified regime to stop the diversion of goods at ports of entry,” said Rotich.

Experts say while Kenya has a more rigorous and sophisticated warehousing regime that makes it difficult to evade taxes, it is not the case in the other countries. This is largely due to lack of regular inspections of the warehouses and capacity to investigate suspected cases of diversion.

Rotich said proper declaration of valuation and verification to ensure the right tax base was one of the key areas of focus in the customs reforms.

The Kenya Revenue Authority has installed a new and improved customs management system – enabling clearing of goods before they arrive at the Mombasa port – to replace the Simba system introduced in 2005.

However, some traders still take advantage of the fact that the tax authorities do not have adequate capacity to pursue them when they divert goods into the local market. "The warehousing regime on the Kenyan side is tight.

The legal and administrative system in place is well secured and implemented. But we have issues in the neighbouring countries,” said Steve Okoth, tax manager at tax and audit firm RSM Kenya.