URA to examine challenges related to digital tax stamps 

Spirits, beer, and wines are some of the products gazetted to carry digital tax stamps. However, manufacturers want URA to mitigate the cost of the stamps. Photo / File 

What you need to know:

  • URA’s action has been informed by a PSFU-commissioned report which highlights a number of challenges, including the cost of digital tax stamps

Uganda Revenue Authority (URA) has said it will examine challenges associated with implementing digital tax stamps, which manufacturers say have increased the cost of business. 

Speaking at the launch of a Private Sector Foundation Uganda-commissioned report on the impact of digital tax stamps on manufacturing, which was conducted by PwC in Kampala yesterday, Mr John Musinguzi Rujoki, the URA commissioner general, said government is willing to engage in achieving the long-term objectives of enhancing Uganda’s manufacturing capacity and value addition, while at the same time expanding the country’s tax base.  

“Anything that takes away your morale to invest is something, URA would definitely not support,” he said, noting that they would study the report further with the view of engaging the private sector, manufacturers, and other stakeholders to “have a discussion and see how to improve”. 

Mr Rujoki was responding to a presentation of the report by PSFU in partnership with PwC. 

The report documents, among others the cost of digital tax stamps, compared to other EAC member states. 

It notes that stamps, which cost between Shs110 and Shs13 in Uganda for different products are on average 28.7 percent more expensive than in Kenya, 25.9 percent in Tanzania, but 4.8 percent lower than in Rwanda. 

However, in response Mr Rujoki said the contract signed between URA and the digital tax stamp service provider - SICPA - allows for a gradual reduction in the cost of stamps, noting that there had already been a reduction in the cost of stamps for spirits and beer, among other products. 

He also acknowledged that countries that had adopted digital tax stamps earlier had already achieved a progressive threshold for a price reduction, attributing this to different factors such as improved compliance that has increased declarations, which are significant enough to prompt a reduction. 

“Yes, I agree with you, we should further reduce the cost so that the administrative expenses do not affect your profit margins and ultimately the revenues we aim to collect,” he said. 

The report also noted a decline in excisable duty collections, which Mr Rujoki said would be investigated further to determine whether it had resulted from the current challenging economic environment or if there were non-compliant companies. 

At the same event, Mr Andrew Kilonzo, the Uganda Breweries managing director, said the costs associated with the digital tax stamps had driven up the cost of doing business, urging government to find mitigation measures.  

“We are spending Shs20b for digital stamps and another Shs8b in other chains of production while being affected by illicit alcoholic trade,” he said, adding that in addition to paying excise duty, the paper used to implement digital tax stamps is subject to value-added tax, urging government to zero-rate the papers.  

However, Mr Rujoki noted that whereas some areas need to be studied carefully, some manufacturers such as those in the Kombucha businesses - many of whom were involved in illicit alcohol trade - who were not paying taxes, but taking up the market where those who pay supply products, had been brought into the taxable fold thus creating a leveled ground. 

No tax contribution

A 2022 report by Euromonitor indicated that only 35.5 percent of alcohol, equivalent to 543,331 litres in Uganda, is legally sold, while a large amount is illicit and contributes minimally or not at all to tax revenues. 

Digital tax stamps, implemented in 2019, aim to reduce the sale of illicit and substandard goods, close tax loopholes, and enhance compliance. 

The stamps have since been implemented on various products, including beer, spirits, wine, mineral water, cigarettes, soda, sugar, cooking oil, and cement, among others.