Uganda set to roll-out the digital tax stamps, beverage industry players plead for ease of cost burden

UGANDA – The government of Uganda is set to roll out the use of digital tax stamps and expand the range of products covered in it, to enable the government take measures to curb tax leakages thus earning higher revenue in the financial year 2020/2021.

The implementation of the DTS solution is also expected to combat counterfeit products on the market and protect consumers’ health and manufacturers’ earnings.

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It is also expected to enforce compliance through real-time and accurate declarations by manufacturers, reports Daily Monitor.

“Digital stamps ensure that goods on the market meet the required health and safety standards. I also know that some of you are unhappy about it but it will help us to know what is going on,” said the Minister of Finance, Mr Matia Kasaija as he delivered the country’s 2020/2021 budget.

The beverage manufacturer have since responded indicating a proposal that the cost of implementing Digital Tax Stamps (DTS) to be met by the government.

In a letter to the Minister of Trade, Industry and Cooperation Ms Amelia Anne Kyambadde, the beverage industry players have noted that Covid-19 pandemic is already hitting the beverage sub sector, including makers and processors of Juice, water and alcohol.

The letter authored by the Executive Director of Uganda Manufactures Association (UMA), Mr Daniel Birungi, regarding the implementation of the DTS amidst the Covid-19 pandemic, indicated that industry’s production capacity has reduced by at least 40 per cent and the sales’ revenues declining by between 50 to 65 per cent.

Reports have further indicated that the closure of bars, restaurants and social gatherings due to Covid-19 has cost government at least Sh25b (US$6.7m) in revenue in the last three months the industry would have otherwise generated.

With the rolling out of the DTS beginning next month, manufacturers of water, sodas, spirits and wine among others, said they are not in position to bear the Shs15b (US$4m) cost, asking the government to pick up the bill as it had earlier indicated.

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“Hon. Minister, the businesses in this sub sector continue to face the threat occasioned by the forthcoming end to the government period of payment for the DTS. This will result in additional costs on the already financially distressed sector players with a potential to result in job cuts and even closures,” reads the correspondence in part.

Uganda Manufacturer Association (UMA) in the letter said it would like to emphasise that government continues to bear the cost of implementation. This is because the Shs15billion (US$4m) cost incurred per manufacturer annually will lessen the cost of recovery to the industry, which needs to rebuild the marketplace.

“Should the government pick up the cost, it will in turn allow the industry to contribute to the economy in terms of investing in opportunities to redevelop the trade and support the trading outlets/ shops adversely impacted by the lock down measures.”

“The industry will also focus on financing opportunities to redevelop the different value chains impacted during the pandemic, supporting at least 44,000 farmers growing grain and cereals in Acholi, Ankole, Busoga, Lango, Kigezi, Sebei, Teso, Toro and West Nile,” Mr Birungi said in the letter which the Minister of Finance is also copied in.

The move will further enable the industry players to normalise production, maintain staff and suppliers, thereby protecting jobs and be able to pay other taxes.

UMA research into the impact of additional costs on manufacturers’ revealed that manufacturers would inevitably pass on the full DTS cost to the final consumer through increased pricing.

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