Digital tax solutions driving up production volumes, says Finance Ministry
Many alcoholic drinks gazetted under digital tax stamps saw an increase in volumes in the period ended June 2023. Photo / File
What you need to know:
- Increased revenue from products such as spirits and beer, among others, saw local excise duty post a surplus of Shs36.44b
A Ministry of Finance Background to the Budget report has indicated that digitizing tax systems supported manufacturing efficiency and production in the period ending June 2023.
The systems, among which include digital tax stamps and related enforcement mechanisms, have notably enhanced declaration and payment of local excise duties, which during the period saw several gazetted products post revenue surpluses and increased production volumes.
The report notes that increased revenue from products such as spirits and beer, among others, saw local excise duty post a surplus of Shs36.44b, in addition to remarkable growth in production volumes across several product categories.
During the period beer experienced an 81.30 percent surge in production, increasing to 516.4 million liters, while soft drinks, which include soda and juice, saw volumes increase by 25.64 percent to 918.2 million liters.
Spirits posted a 22.7 percent increase, rising to 101.7 million liters.
However, despite the gains, declines were observed in cement, sugar, and wines.
Government has previously indicated that it is banking on digital tax solutions, among which include digital tax stamps, electronic fiscal receipting and invoicing solutions, and rental income tax, to improve tax collection and administration.
In a report prepared by Uganda Revenue Authority (URA), Mr Ibrahim Bbosa, the URA assistant commissioner of corporate and public affairs, indicated that the growth in sales and production volumes had returned an increase in tax revenues, as a contribution of digital tax stamps, whose collections during the period rose by 30 percent from Shs740.79b to Shs963.38b.
“The contribution of [digital tax stamps] to tax collection can be measured in register growth and revenue growth. The number of taxpayers in the [digital tax stamps] register has increased from 40 to 1,201, which includes 886 manufacturers and 315 importers,” he said, noting that the local excise duty register for digital tax stamps-gazetted manufacturers had grown from 127 to 662 taxpayers.
The Ministry of Finance report also noted that digital tax transformation had supported the improvement of the tax-to-gross domestic product ratio, exceeding initial projections.
Digital tax stamps solution, which is implemented by SICPA, has been crucial in enhancing tax compliance and ensuring that products in the market meet required quality standards.
Government has also indicated its continued willingness to support digitisation of the tax system, which it says will help it to achieve improved tax efficiency and administration.
Speaking at a recent Review of Resource Envelope for the 2024/25 financial year workshop, the URA Commissioner General John Rujoki Musinguzi, said digital tax solutions had helped optimisation of revenue collection and closing tax leakages, which had been largely supported by the Ministry of Finance.
