Trade Minister Amelia Kyambadde has asked her Finance counterpart, Matia Kasaija to request Uganda Revenue Authority (URA) to “stay implementation” of the Digital Tax Stamps pending discussions with manufacturers who claim the new solution will increase their costs of business in a price sensitive market.
In a letter to Kasaija dated January 21, 2019, Kyambadde said manufacturers sought her intervention on the DTS, saying there was need to extensively discuss integration and compatibility of the digital stamps and UNBS product quality and safety assurance system.
DTS project was already being implemented by URA, Uganda National Bureau of Standards and SICPA-SA, a Swiss company.
The DTS mechanism is a combination of machines (applicator), the stamp (both digital and physical) and internet based software supplied by SICPA.
SICPA-SA is to supply, install, monitor and maintain equipment at their cost, and they will be paid for each Stamp applied.
DTS equipment will require online connectivity, factory line modifications and system alterations which manufacturers say is costly.
However, in a petition, manufacturers complained of disruption to factory operations; possible capital and industrial flight not to mention reduced investment in the sector.
They further said implementation of DTS would create a situation whereby outflows would outweigh projected benefits and that the system was being implemented without adequate consultations with stakeholders.
URA speaks out
Uganda Revenue Authority (URA) public relations official, Ian Rumanyika recently told ChimpReports one of the primary goals of the system was to close any existing gaps in excise tax collection, which means addressing both illicit trade as well as under-declaration.
“The system is intended to monitor and control the production and importation all excisable goods, not just beer, and is intended to give URA data to ensure / verify full and fair taxation of all products that are subject to excise taxation,” he said.
Rumanyika further said “illicit trade is a much larger problem for some product categories than for others (for example, more than 60 percent of spirits and more than 90 percent of opaque beer in the market is estimated to be illicit).”
However, manufacturers of beer and soda say there isn’t any counterfeit beer and soda products on the market.
Rumanyika said regardless of the extent of illicit trade for each individual product category, “URA needs to have an objective, verifiable source of data about production and importation volumes of all relevant products in order to ensure that every economic operator is paying their fair share of excise taxes.”
ChimpReports understands Museveni on August 18, 2018 wrote to Premier Ruhakana Rugunda, saying “the Swiss company I introduced to the Minister of Finance many months ago that should do the Digital Stamp Tax at the factory point, should also be tasked to handle the quality at the same point.”
Kyambadde weighs in
Kyambadde said in light of the disagreements between URA and manufacturers, the Ministry has constituted a taskforce to “review the issues raised, best practices in the region and globally and the implementation framework of the DTS and provide recommendations to appraise members of Cabinet on the subject matter.”
She added: “It is therefore necessary, to have further consultations with various stakeholders to interrogate the issues raised on the DTS system and develop a harmonised system that will comprehensively address the problem of counterfeit goods, illicit trade, under declaration and eliminate tax leakages without unduly creating additional costs to our manufacturers.”
The Minister said while this activity is ongoing, “it is important that URA temporarily halts the implementation of the DTS in the current form until the report is ready for consideration in two weeks.”