KRA was established on 1st July 1995 through an Act of Parliament as a central body for the administration and enforcement of all the laws relating to revenue under the general supervision of the Minister for Finance. Its mission is to promote compliance with Kenya’s tax, trade and border legislation and regulation. It administers the Customs and Excise Act, East Africa Customs Management Act, Value Added Tax (VAT) Act, Income Tax Act and the Traffic Act.
Specifically, KRA was established to:
- Improve co-operation and information sharing among revenue departments.
- Eliminate bureaucratic controls and introduce efficient and effective systems and procedures.
- Introduce better working conditions, better remuneration, an optimal compliment of staff and enhance integrity.
The Customs Services Department (CSD) was the largest of the four Revenue departments under KRA in terms of revenue collection , before Domestic Excise was shifted to DTD and countrywide operational network . In terms of manpower, CSD ranks second after DTD.
Revenue collection by the Kenya Revenue Authority 2002/2008 (as a % of GDP)
CSD has been collecting over 40% of total revenue except in FY 2003/04 and 2004/05 and beyond when VAT Department was merged with Income Tax Department (1USD = appximately Kshs 80)
CSD has 34% of all KRA staff distributed in all gazzetted entry and exit points including several preventive outposts in certain strategic locations within the country.
Mandate of Customs Services Department
Primarily, the department administers the Customs and Excise Act (CAP 472) of the Laws of Kenya) and the East Africa Custom Management Act. The core business of CSD broadly involves enforcement of prohibitions and restrictions, collection and accounting of revenue, security and trade facilitation, and compilation of trade statistics for economic planning.
Revenue Collection and Accounting
The department collects the following types of duties:
- Import duties -on imported goods.
- Export duties -on certain exports e.g. hides and skins, and scrap metals.
The department also collects the following fees and levies on agency basis:
- Air Passenger Service Charge – on departing passengers.
- Aviation fee – on aircraft flying into the country.
- IDF fee – on import permit.
- RML – on certain petroleum products.
- PDL – on petroleum products.
- FMV permit fee – on foreign motor vehicles.
- Transit Road Toll – on foreign motor vehicles.
- Sugar Levy – on sugar imports.
- Revenue Stamps -for certain transaction documents which, by law, require affixing of stamps.
The department is charged with the responsibility of facilitating international trade which it does by providing expedited clearance of goods through simplified and harmonized Customs procedures as envisaged under the Revised Kyoto Convention. Customs administrations all over the world apply almost the same procedures and processes, speed of clearance depending largely on what controls are required by legislation and the degree to which information and communication technology is applied.
Compilation of Trade Statistics
The department collects and collates trade data on all imports and exports that the government uses for planning purposes.
Protection of Society through Enforcement of Prohibitions and Restrictions
The department is the only Government agency mandated to take full control of imports and exports and in doing so it:
a) Protects public safety, health and morality by barring international trade in illegal substances and materials e.g. narcotic substances, arms and ammunitions, endangered animal species, hazardous wastes, pornographic materials, and expired, counterfeit or sub-standard goods.
b) Liaison with other law enforcement agencies nationally and internationally to prevent trans-border crimes e.g. movement of drugs, stolen motor vehicles, smuggled goods, etc.
Customs Reform and Modernization (CRM)
An open economy like Kenya exerts a heavy demand for trade facilitation on the part of Customs administration and other government agencies with border responsibilities. Modern Customs administrations have recognized that streamlining and simplifying clearance procedures is beneficial to their importers, exporters and national economies. This is so because it has a bearing on the efficiency of traders in meeting the challenges for better product quality, lower costs and faster delivery.
In addition, trade-related transaction costs such as freight charges and other logistical expenses are a crucial determinant of Kenya’s ability to participate competitively in a global economy. Some problems that add to the costs of trade are:
a) Port congestion that affects turn-around time for feeder vessels and railway wagons.
b) Complicated Customs procedures.
c) Complex and non-transparent administrative requirements, often pertaining to documentation.
d) High costs for processing trade information
CRM was expected to enhance the capability of Customs to perform its core functions by carrying out a comprehensive Business Process Improvement (BPI) and implement full automation. A critical area that BPI addressed is the time it takes to clear cargo through various Customs stations. CRM Programme had been inspired by reforms and best practises prevailing in other Customs administrations.
In July 2005, KRA implemented a new Customs system (Simba 2005 System) to replace the Bishops Office Freight Forwarders Integrated Network (BOFFIN) system that was implemented in 1989. The Simba 2005 System encompasses TRADE-X , LEUK , PAYBOX and ORBUS modules. The implementation of Simba 2005 system has yielded considerable gains in the Customs clearance process.
CSD Strategic Objectives (goals)
In its efforts to achieve its vision of the future, respond effectively and efficiently to the aforementioned challenges and reduce the gap between reality and limited resources, the Department has identified the following Strategic goals which it intends to pursue in order to modernize and transform the Department:
- Enhance staff professionalism, integrity and productivity.
- Protect society and the environment using proactive enforcement approaches.
- Enhance voluntary trader compliance through quality client service.
- Facilitate legitimate trade through improved and integrated processes applying modern technology.
- Support professionalism of customs agents and other trade chain participants.
- Enhance revenue collection efficiently.
Simba 2005 system is similar to the GAINDE System of Senegal.
TRADE-X is the Customs clearance management module.
LEUK provides Customs agents and Ship agents with on-line regulatory information including tariff research.
PAYBOX module provides on-line contact between banks and Customs.
ORBUS module facilitates electronic contact between Customs and Customs agents, Ship agents, carriers as well as regulatory government agencies.