Court stops enforcement of digital tax stamps deadline

Monday February 3 2020

Required: A number of products such as

Required: A number of products such as cigarettes will be required to have digital stamps as a measure that seeks to curb tax leakages and trade in elicit products. FILE PHOTO  

By Dorothy Nakaweesi

Court has stopped Uganda Revenue Authority (URA) from implementing the February 1 deadline that the tax agency had given manufacturers to install equipment for Digital Tax Stamps (DTS).
In an injunction issued by the Commercial Division of the High Court on Friday, URA was directed not to enforce the Saturday (February 1) deadline until Tuesday (February 4) when an application for stay of execution has been heard.
“An interim order … restraining the respondent (URA), its agents … or any person deriving authority from it, enforcing of the February 1, 2020 deadline of the transitional period by which all gazetted goods comprised in water, soda, wine, beer, spirits and tobacco should bear the Digital Tax stamps under the Digital Trucking System which is being implemented by the respondent (URA),” the order issued by Deputy Registrar Agnes Nkonge, reads in part.
This is the second time court has issued an order against Digital Tax Stamps with the first being last year when a section of manufacturers filed an application against the implementation of the system.
However, court dismissed the case, which gave URA a go ahead to implement the system.
Digital stamps are physical paper stamps with security features and codes applied to goods or their packaging to enable manufacturers and traders to track a product’s movement.
The system, according to government, will also be a key feature in eliminating counterfeits and fake products on the market.
The application filed through Muwema and Company Advocates was heard in the absence of the respondent (URA).
A copy of the order seen by Daily Monitor indicates that the application was filed by Sylvester Kamuli, a resident of Kampala, who argued that as a consumer of various products, which have been subjected to Digital Tax Stamps, URA was infringing or threatening his rights guaranteed under the Constitution.
In a telephone interview at the weekend, Mr Ian Rumanyika, the URA manager corporate affairs, said they had not been served with the order, noting that the tax agency had already dispatched a team to implement the Digital Tax Stamp system.
“We have not been served and we have already dispatched a team to start effecting the implementation,” he said, noting they had already registered success with a number of companies complying.
Mr Shaban Sserunkuuma, the Consumer Education Trust director programmes, a consumer protection organisation, at the weekend told Daily Monitor Digital Tax Stamps will benefit consumers if they are well implemented.
“Many times government is largely interested in taxes and does not look at the whole picture. As a consumer activist, I would be happy for government to collect as much taxes as possible to deliver social services to people but protect businesses and consumers,” he said, noting that the way the issue of Digital Tax Stamps was hatched is a top-bottle approach that will in the end lead to increase in prices of consumer goods.
Mr Everest Kayondo, the Kampala City Traders Association chairman, said government should respect the order without harassing traders who have not met the deadline.

Digital Tax Stamp is one of URA tax measures that seeks to close tax leakages.
However, it has enlisted mixed reactions, with some companies opposing the tax due to the fear of increasing the cost of doing business.
The stamps are applied to goods or their packaging to enable manufacturers and traders to track a product’s movement. This will also enable government to monitor tax compliance.
The stamps are part of URA’s scheme to combat illicit trade, close revenue leakages while managing compliance of some multinational companies that exploit gaps and in the tax collection architecture.