Gov’t Postpones Implementation of Digital Tax Stamps Amid Manufacturers’ Protests

Prime Minister Dr. Ruhakana Rugunda, has today Thursday told Manufacturers that the go-live date of the Digital Tax Stamps enforcement would be February 1, 2020 instead of November this year.

He also assured Manufacturers that the Government would meet the cost of installation and Digital Tax Stamps for the first year of operation. 

In a meeting at the Office of the Prime Minister called to avert a possible shut-down of manufacturing tomorrow over Digital Tax Stamps, Rugunda told Manufacturers that the government was “pro-people and pro-business”.

“I assure you that this government will do everything to encourage manufacturing and would not take any steps to frustrate you. We also, however, pursue all means to ease tax administration,” he said.

Manufacturers had expressed a number of concerns with this new measure, which they say URA has declined to address.

First, they are opposed to the application of DTS at the cost of local manufacturers rather than URA itself.

This, they say, is tantamount to double taxation since they pay Excise Duty, Income and Corporation Tax, and Pay as You Earn (PAYE) Tax, among other levies.

In the letter on Tuesday to President Museveni, the manufactures through their association UMA, said URA’s hurried implementation of the project was likely to disrupt manufacturing and employment, but also lead to an increase in costs of production.

The manufactures therefore want government to gazette its commitment to pay for the costs association with DTS, rather than themselves.

They also want to URA to “cease to victimize manufacturers in order to pressure them to accept the costs.”

The Director of Tax Policy in the Ministry of Finance, Moses Kaggwa, confirmed the government commitment to cover the costs of Digital Tax Stamps for local manufacturers and said additional costs of implementation that were not envisaged would be deductible.

“We provided for the cost of installation of equipment and the cost of the stamps themselves. We did not, however, envisage some additional costs that a few manufacturers might face, but those costs will be deductible,” Kaggwa said.

URA Commissioner for Large Tax Payers, Silajji Kanyesigye, said the November 1, 2019 installation would only be for imported goods within the Digital Tax Stamp categories of: Tobacco, Sodas, Water, Wines, Spirits and Beer.

“We have given manufacturers a three-month transitional period so that between now and January 31, 2020 everyone instals and tests the equipment,” he said.

It is estimated that, forcing for instance Uganda Breweries Ltd to have a stamp on each of its bottles at cost of Shs 50 as proposed by URA, will cost the company up to Shs 1.2Billion per month.

Without compromise with the manufacturers, however, URA proceeded with this implementation plans, announcing earlier last month that the project would go live as planned at the start of November.

Manufacturers, led by Uganda Manufacturers Association (UMA) Chairman Barbara Mulwana, today welcomed government commitment to pay the cost of Digital Tax Stamps and emphasized that at the end of the one-year period an assessment be carried out to determine value for money.

“As Manufacturers, we welcome government efforts to collect more tax revenue. But we are always concerned if these increase our cost of operation and threaten our survival. If URA and Manufacturers are not ready at this point to implement this or the government won’t get the benefit planned, it is better to wait before we implement it,” she said.

Rugunda urged the Manufacturers and government bodies to keep channels of communication open during the implementation process.

Government, through the Minister of Trade, Industry and Cooperatives, has established a Technical Working Group to guide the smooth implementation of Digital Tax Stamps and review its success after the initial one-year period.

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