Digital tax stamps: Looking beyond cost

Monday March 2 2020

Must have:  Products such as water must have

Must have: Products such as water must have digital stamps. FILE PHOTO  

By Dorothy Nakaweesi

It has been an exchange over and above. The push and pull is certainly a signal of a departure or something missing.
Rightly so, the issue of Digital Tax Stamps has been and continues to be a difficult subject not only for manufacturers, but the general public and government as well.
On November 1, 2019, Uganda Revenue Authority (URA), under the digital tracking solutions strategy, announced it would roll out Digital Tax Stamps for all excisable products.

The tax, which would first apply to selected products such as water, soda, spirits, cigarettes and wines, among others, according to a brief, sought on the part of URA to plug revenue leakages, combat illicit trade, boost and increase efficiency in managing taxpayer compliance.
On the part, it would enable manufacturers, distributors and retailers to conveniently verify, monitor and trace movement of their goods throughout the distribution chain.

Beyond this, the brief noted, was an important aspect that would benefit consumers who have over the years suffered with counterfeits.
“They [consumers] will be able to verify the authenticity of a product … by simply looking out for physical security features on the stamp,” the brief noted, explaining that this would be done by quoting the reference on the stamp and sending a short text message through which key details about the manufacturer and the product would be relayed.

Therefore, one would understand that the stamps would be an important aspect given that Uganda National Bureau of Standards has previously indicated that 54 per cent of goods on the Ugandan market are counterfeits.
Counterfeits have certainly been a problem for not only the public but manufacturers and government as a whole.

Why the fight resistance then?
Therefore, why would a section of Ugandans standard in the way of a system that seeks to partly or wholly eliminate this problem?
Uganda Manufacturers Association (UMA), Kampala City Traders Association and Private Sector Foundation Uganda have all come out on this matter, accusing government and URA of not listening to their concerns.
However, amid all this, manufacturers have silently complied with 65 companies out of the targeted 93, according to URA, installing Digital Tax Stamps equipment at their factories.

“Manufacturers are not resisting DTS [Digital Tax Stamps]. We have welcomed the solution but have strongly argued … the cost [of installing must be] met by URA or government, instead of manufacturers,” says Simon Kaheru, the Coca-Cola Beverages Africa in Uganda public affairs and communications director and UMA board member.
“It is an administrative cost to ensure that we pay taxes, so we should not be the ones to pay it. Enforcement has to be done [rightly] if it is to fight counterfeit,” he adds.


Coca Cola is one of the 65 companies, according to URA, that have already installed Digital Tax Stamps equipment at two of its plants in Namanve and Mbarara.
A November letter written by Finance Minister Matia Kasaija indicated that the cost of installing Digital Tax Stamps was to be borne by government.
Therefore, its difficult to understand the point of departure, especially when in regards to who foots cost.

“I am writing in connection with the Digital Tax Stamps provider, SICPA. This [Digital Tax Stamps] electronic method eliminates all fraud. I, therefore, direct that all factories must give access to the company [SIPCA] to install cameras at our [government] cost,” Kasaija wrote, noting that URA should also discuss with SICPA the possibility of monitoring other taxes such as Income Tax and others that are not covered under the current arrangement.

Whereas government is footing the cost of installation at the moment, it hopes to transfer the same to manufacturers, which continues to be a sticky issue and at the moment it is difficult to understand how URA will handle this.
Phone calls to different URA officials at the weekend, which is the main user department, went answered by press time.
However, previously government has indicated it would foot the cost in the first year of implementation and transfer it to manufacturers thereafter.
Indeed, this might be the point of departure and according to Francis Kisirinya, the PSFU deputy executive director, it be another cost to manufactures.

“Obviously, if you look at the cost. The most expensive one [Digital Tax Stamp] is around Shs80 and the cheapest is around Shs15. Obviously this is a cost that someone must meet. Now, who will meet that cost? Is it the manufacturer or the consumer? Whichever way it goes, it will increase the cost of business,” he says explaining the point of departure.
Recently, PSFU, which is an umbrella organisation for the private sector, threatened industrial action in the wake of a court injunction that had stopped URA from implementing a February 1 deadline within which all manufacturers of the selected products had been expected to have installed Digital Tax Stamps equipment.

In court
The case filed through Muwema and Company Advocates is ongoing but discussions for a harmonised position and a number of concessions, among them not arresting consumers found with goods that lack digital stamps, have been reached.
In October last year, while reacting to a URA notice, manufacturers under UMA, petitioned Trade Minister Amelia Kyambadde, asking that government should commit on covering the cost of implementing Digital Tax Stamps.
“… the affected members would wish to have unequivocal confirmation … indicating that government shall pay for the costs associated with the implementation,” the petition noted then.

Therefore, according to different players that Daily Monitor spoke to, the issue is not to have or have digital stamps.
Beyond maximising revenue collections, government insists digital stamps will curb counterfeits, something that is increasingly becoming a national challenge.
“What are they [manufacturers] afraid of? Kasaija wondered in his November letter, in which he also noted that government should consider establishing a one-stop centre that would monitor tax fraud and promote quality control.
However, no details have been provided on the progress of the centre after an intergovernmental agencies meeting on the same matter.

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