Despite the numerous legislative and regulatory efforts to streamline trade in Kenya, the plague has continued to thrive. The existence of various laws set up to stop illicit trade has not been of much help since such crimes have been deemed as petty crimes because they are considered victim less crimes.
A study on the vice of counterfeiting in Kenya, done in 2012, shows that Kenyan manufacturers are losing at least 40% of their market share to counterfeiters.
Illicit trade includes both goods and services that are deemed illegal. The reason is that they are dangerous, morally unacceptable or fail to comply with regulations governing their otherwise permitted production or distribution.
The profit margin may be made through
- using non-conforming materials
- avoiding the difference in tax evasion and selling a prohibited product in major consumer market at 100 times the price in a source country.
- Illicit trading is not victim less, in fact it is quite the opposite. Here are some of the major challenges that come with:
Our country is one of the major victims. A study by KAM, Kenya Association of Manufacturers, shows that it makes an average loss of $42 million annually to illicit trade and $80 million loss of government revenue. This forces government to increase taxes in order to recover .i.e. increase in import duty from 25% to 35% this year.
- Smuggling of substandard quality can be both a safety and health hazard to consumers. Instances such as buildings collapsing due to issues contractors being sold poor quality building materials.
- Illicit trade often shows a weekend or corrupt state that is unable to assert the rule of law. In the end this creates a hostile environment for legitimate businesses and discouraging local and foreign investment.
- The concept of free and open market is undermined which is fundamental for a developing country. This may lead to lack of competitiveness and monopoly in the market, decrease in investments, and lack of employment, which will not help the economic situation at all
However the battle on illicit trade is not a lost cause.
- Sharing information on and education the mass on illicit trading: In order to solve a problem you must know the problem first. Most people will not know the issues that come with illicit trading and will turn a blind eye. Misconception such as it being a victim less crime or it not involving them.
- Training law enforcement on illicit trade: They need to know on how to deal with illicit trade and to know the victims of the trade.
- Development of proper tax system: It is cheaper to prevent a disease than to cure. Our tax system should be improved to be able to catch illicit traders before they are able to sell their goods or service, as opposed to the current situation where crime is committed and the investigation begins. Digitisation of our tax system can help with this.
- Seizure, storage and destruction of confiscated illicit goods and exhibits used in courts. This should prevent seized goods from going back into the market.
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