The Commissioner-General for Uganda Revenue Authority, Doris Akol has said that the newly launched Digital Tax stamps will increase revenue for both government and legitimate business, urging that only those people with dubious operations should be worried.
Akol, in a long statement, said that the government is likely to earn in excess of Shs180b with this new move:
Uganda Revenue Authority (1JRA) has today, November 1st 2019 in The Tax Procedures Code (prescription of Goods for Affixation of Tax Stamps) Instrument, 2019 in line with the Tax Procedures Code Act, 2014 began implementing the Digital Tax Stamps solution.
Excise duty law dictates that all businesses dealing in excisable goods are supposed to have their premises monitored 24/7, but with the number of factories in Uganda growing to over 5,000 and many producing night and day, it became impossible for URA to execute. That, then meant that the government was relying on largely the manufacturers’ accuracy and truthfulness- the absence of which leads to severe tax leakages.
In simple terms, tile stamps are indelible ink stamps to be affixed on beer, spirits, bottled water, soda, wines, and tobacco products before the goods are released for sale onto the market, For tile above products, that are locally manufactured, the stamp will be affixed on the on while on the production line and where the line is not automated, the stamps shall be fixed manually at the manufacturers’ premises.
For imported goods, stamps will be affixed at the point of entry or at a production facility in “the country of origin” By tile time the goods enter, the country we will already know the goods, the owners and how much tax is due
At its most basic. especially for the automated production lines. URA is able to know as the production goes on, how many units are being produced or when production has been stopped, For anybody who has been falsifying production numbers; anybody who has been hiding any elements of production: they will find it difficult, because we will know the production before you even reach the monthly declaration because the digital tax stamps solution is connected to our servers that can be remotely monitored
Contrary to what is being claimed, Digital Tax Stamps are not a new tax, but rather in the words of Finance Minister, Hon Matia Kasaiiia in 2017/18 Budget speech: Tax: stamps minimize under-declaration of such goods and boost tax collections,” The Hon Minister we to say’: “Failure to affix tax stamps, the defacing of stamps, the possession of unstamped goods, or any attempt to acquire or sell stamps without authorization will lead to penalties as prescribed by law,
Right from the time the announcement was made in the budget, URA started engaging all the would-be affected manufacturers as well as the Uganda ManufacturerS association. A number of other engagements were also had with the Minister of Finance with manufacturers.
Implementation of the solution was supposed to start in April this year but because the relevant legislation was not ready, the deadline was pushed to July 1st, 2019, but again there were some glitches but finally, following the gazetting of the necessary laws in August 2019 on September 1st, we informed all the affected manufacturers and Importers that we were ready to implement, come November 1st, 2019.
But even then, we have extended to them an interim period between November 1st, 2019 and February 1st 2020 to allow the manufacturers to have the solution installed at their premises, as well as to clear the unstamped stocks out of their warehouses and shelves.
But as URA we are disappointed that despite the fact that Digital Tax Stamps were announced over two years ago; despite the fact that we have engaged all the affected parties and regardless of the fact that because of the delays a number of manufacturers are trying to sabotage and blackmail government and or cause a crisis around it, either to delay or
postpone the introduction of the solution.
It is even more disappointing that some of the major players that are sabotaging the implementation of this law do originate from and or operate in countries and markets where Digital Tax Stamps as a tax solution has been running for some time and these companies are complying in those countries. Why they think it is only in Uganda where they can reject Digital Tax Stamps” is anyone’s guess.
Yes, we do understand that there shall be some costs of implementing the solution, but these costs pale in comparison to the anticipated broader gains.
In fact, the legitimate businesses operating in Uganda, especially those that have nothing to hide, there are all good reasons to welcome and support this solution because it bears immense medium to long term benefits to them.
For example, British American Tobacco (BAT) Uganda, last year, according to media reports said that an estimated 23%, of the total cigarettes sold in Uganda, was illicit” causing the business an estimated UGX30 billion in lost business.
A September 2016 report- compiled by Euromonitor Consulting for Nile Breweries, titled: Market Analysis For Illicit Alcohol In Uganda reported that counterfeiting (mainly industrial manufacturing by unregistered distillers) and smuggling combined accounted for 4S. 9% of the illicit alcohol market, worth USD310.1 million (UGX1.2 trillion) in value and USD92.71n
According to the report, the industrial manufacturing of low-grade spirits. represented the biggest chunk of the illicit category, Although most of the illicit were mostly packaged in sachets, a good amount was also packaged in glass and PET bottles with original branding or copycat branding of major local brands. Counterfeiting was prevalent in all segments of the market
from premium and mid-priced international imported brands as wen as mimicking of legally produced, local high-quality brands as well as mid-market and budget, locally branded alcohol
A similar study quoted by ABinBev in July 2019 states that in Uganda, 63.3% of the alcohol beverages market is dominated by illicit alcohol.
With Digital Tax Stamps we will be able to easily identify all these fake products from the market and using the new law which allows us to confiscate the unstamped products and prosecute everyone including the distributors and retailers, we will be able to remove as many illicit products from the market as possible. This is also important for the protection of our
people who have no means of detecting illicit or dangerous alcohol.
Now that sachet alcohol has been banned, and with the digital tax stamps, it is possible to remove up to 50% of the illicit cigarettes and alcohol from the market, This will create new markets for the legitimate players worth UGX1S billion and UGX600 billion for cigarettes and alcohol respectively in value. This will earn the government in excess of UGX180 billion in taxes!
That is what I call a win-win for all of us.
Doris Akol is The Commissioner General – Uganda Revenue Authority