Manufacturers gather signatures against digital tax

Thursday July 16 2020

A brewery worker monitors a beer production

A brewery worker monitors a beer production cycle. Manufacturers demand that the cost of digital tax stamps, which is intended to assist government improve tax compliance, should not become their burden. PHOTO | FILE 

By Dorothy Nakaweesi

Manufacturers under Uganda Alcohol Industry Association and Uganda Water and Juice Manufacturers Association have said they have gathered at least 500 signatures in a process that seeks to petition President Museveni against the cost of digital tax stamps.
Speaking in an interview yesterday, Mr Onapito Ekomoloit, the chairman of Uganda Alcohol Industry Association, told Daily Monitor that whereas they are not against digital tax stamps, it was insensitive for Uganda Revenue Authority (URA) to transfer the cost of the tax to manufacturers in a period in which they are experiencing disruptions in their operations and cash flow.
“We are only saying that government, through URA, should finance this process. This is a URA mechanism; same as other measures they (URA) have been funding,” he said, noting that government should “not transfer the burden to the manufacturer”.

Mr Onapito also sought to rally the support of “all stakeholders, especially those affected by the cost of digital tax stamps right from farmers, distributors, retailers, bar owners and consumers”, saying the stamps will have a wider implication on the price of the final products, which might impact the whole value chain.

Last month, manufacturers under Uganda Alcohol Industry Association and Uganda Water and Juice Manufacturers Association, petitioned stakeholders and the public to sign a petition that they said would be presented to the President.

The petition, they said, would be a basis on which they would request the President to order URA to meet the cost of digital tax stamps instead of transferring it to an already stressed manufacturing sector.

Earlier, the President had ordered government to meet the cost of installing digital tax stamps for at least a year after which manufacturers would meet the cost. The grace period ended on 30 June.

Mr Onapito also said that whereas they have no timeline within which they will seek audience with the President it would only be natural for government to act on their concerns for the larger good.

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Government, on September 9, 2019 started implementation of digital tax stamps on sprits, water, beer, soda wine and tobacco after fending off resistance from manufacturers, who had said the stamps would introduce a cost burden on their operations.
However, yesterday Mr Simon Kaheru, the Coca-Cola Beverages Africa corporate affairs manager, told Daily Monitor they were experiencing “operational issues with the digital tax stamps equipment that sometimes interferes with production.
However, he said: “The most important point now is for government to finally confirm that the cost of the stamps is not moved to manufacturers and consumers - especially during this Covid-19 period.”
Shifting the burden, he said, would save manufacturers from a situation in which they would have to dig deeper to amid revenues challenges resulting from Covid-19-related disruptions.

Whereas the cost of digital tax stamps remains a critical point of contention, Mr Vincent Sseruma, the URA commissioner for corporate affairs, yesterday said the fee charged on the stamp is very minimal, noting that the charge on a mineral water bottle is as low as Shs35 or Shs50.

“When those costs were determined, it was done in a way that they don’t cause significant change on the consumer price,” he said, adding that matters related to the complaints arising from producer associations and the stakeholders cannot be handled by URA because the law has no provision within which they can be handled.

digital tax stamps improve compliance
While digital tax stamps remain a controversial tax, a document prepared by URA last month indicated that at least 84 spirits companies, nine wines and four beer manufacturers and 42 water producers had been brought into the tax fold after years of evasion.

The document, which highlighted the progress of digital tax stamps since implementation, indicates that before September 9, 2019, there had only been nine tax compliant spirits companies and none for wine producers while compliance among water manufacturers had been weak.

For instance, the document indicated, tax compliance among water producers had within a year grow from 16 per cent to 58 per cent while that of spirits and beer producers had grown from 9 per cent to 43 and from 3 per cent to 7 per cent, respectively.

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