SICPA fined Sh210 billion over graft in various countries

Dar es Salaam. The Swiss firm SICPA is to pay 81 million Swiss Francs (about Sh210 billion) in fines at the order of the Office of the Attorney General of Switzerland (OAG) after the company was convicted of corporate criminal liability in connection with acts of corruption in various countries.

A statement, released by the Communications Service of the OAG in Switzerland which was posted on the website of the Federal Council – The Portal of the Swiss government – on Thursday, April 27 says the former sales manager for SICPA was also handed a conditional prison sentence of 170 days while the proceedings against the CEO and major shareholder of SICPA have been discontinued.

“With the penalty order issued in accordance with Art. 102 para. 2 SCC in conjunction with Art. 322septies SCC, SICPA SA (SICPA) has acknowledged that it failed to take all necessary and reasonable organisational precautions to prevent bribes to foreign public officials,” reads the statement.

It states that the OAG has accordingly ordered the company to pay a fine of CHF 1 million and imposed an equivalent claim for compensation amounting to CHF 80 million under Art. 71 para. 1 SCC.

According to the statement, in the conduct of its proceedings, the OAG identified organisational deficiencies that made it possible for employees of SICPA to bribe public officials in the conduct of business in Brazil, Colombia and Venezuela.

Organisational deficiencies were particularly evident in the areas of corporate governance, risk management and compliance.

 In the penalty order, the OAG finds the former sales manager of SICPA, who took advantage of the deficiencies, guilty of bribery of foreign public officials under Art. 322 septies SCC.

“He is being sentenced to a conditional prison term of 170 days,” the statement reads.

The order states that he paid bribes to high-ranking officials in the Colombian and Venezuelan markets between 2009 and 2011. The proceedings conducted against the same former sales manager on suspicion of embezzlement and money laundering were being discontinued pursuant to Art. 319 para. 1 lit. a Criminal Procedure Code (CrimPC), because suspicions justifying an indictment have not been corroborated.

Though the proceedings against the CEO and main shareholder of SICPA were discontinued pursuant to Art. 319 para. 1 lit. a SCC, the statement says, the OAG ordered him to bear a portion of the costs of the proceedings. He was not awarded him any compensation.

“SICPA and its former employee have declared that they will not be appealing against the penalty orders, which will be legally binding,” the statement reads.

SICPA also has operations in Tanzania, Kenya, Uganda and Rwanda where manufacturers have been repeatedly raising their concerns on the high costs of operating digital tax stamps which the company offers through the respective revenue bodies.

Last week, the East African Business Council (EABC) decried the high cost of electronic tax stamps in the region and pressed for quick intervention of the governments of the East African Community (EAC) partner states.

Member countries of the bloc, the EABC said, should - through their respective revenue authorities - take quick action to reduce Digital Tax Stamps (DTS) "by reviewing existing DTS contracts".

The review should be undertaken with a view to reducing the high excise stamp fees imposed on manufacturers.

EABC says despite the solution provider of DTS being the same across the region, the cost of the stamp differs significantly in each country.

The stamp fee is additional to the excise duty tax payable under each country’s respective Excise Act, which the EABC says, was tantamount to double taxation for manufacturers.

An analysis made recently by the business body based in Arusha revealed that the cost of excise stamps was "disproportionately apportioned to different products with no justification".

This meant the cost of the stamps paid by the manufacturers goes to the ‘foreign’ DTS provider/supplier and not to the government's revenue authority.

EABC executive director John Bosco Kalisa said the reduction in costs would enhance compliance of small-scale manufacturers with DTS regulations, improve sustainability, and further boost revenue collection.

A relatively lower and uniform price for DTS would make it easier for firms to adopt the new technology.

A recent study commissioned by the Confederation of Tanzania Industries (CTI) shows the average acquisition cost for the digital print system was approximately $634,000 for beer and $21,567 for soft drinks.

The EABC urges revenue authorities to explore ownership of the DTS system through the Build, Operate and Transfer (BOT) model to limit capital flight.

In the long run, the DTS system should not impose any financial burden on manufacturers.

“Wider public stakeholders’ engagement and inclusion of manufacturers’ input in the re-negotiation process of a better digital tax stamp system is important,” he pointed out, adding:

“This would ease the development and rollout of alternative DTS solutions that are more acceptable to all stakeholders, including small and medium enterprises (SMEs).”