Manufacturing sector players have called for a reduction in the cost of digital tax stamps (DTS) in a bid to drive usage by all the targeted users.
The manufacturers claim that the high costs of digital tax stamps continue to hinder the growth of the manufacturing sector.
Uganda Breweries Managing Director Andrew Kilonzo said that the earlier promise was that once all manufacturers embrace digital tax stamps, the cost of the stamps would reduce, but that has not been achieved.
“The promise of the system was that all manufacturers would get into it and ensure a level playing field. However, in the outlets, you will see our products, such as Uganda Waragi bearing tax stamps, being sold next to items that do not have them,” he said.
In Uganda, the use of DTS was rolled out in the financial year 2019/20 following the launch of the Domestic Revenue Mobilization Strategy by the Finance Ministry. DTS was also aimed at addressing revenue leakages.
In Kenya, DTS was rolled out in 2013, while Tanzania and Rwanda both launched DTS in 2019. While the intention behind these measures is commendable, the varying costs of digital tax stamps across the region have created a complex business environment. For each country, the cost of the stamp for each category of goods has been set out in the respective regulations governing the operation of DTS.
The solution providers for DTS are the same across the region, but the cost of stamps differs significantly. The stamp fee is additional to the excise duty tax payable under the country’s respective Excise Act.
In Uganda, DTS costs are at Shs110 (wines and spirits) and Shs36 for beer; in Kenya, DTS charges are Shs134.88 for wines and spirits and Shs80.93 for beers. Tanzania’s charges for DTS are Shs51.75 for wines and spirits, Shs23.02 for locally produced beers) and Shs27.58 for imported beers, while for Rwanda, DTS charges are Shs761.13 and Shs152.23 for spirits and wines, respectively.
According to Kilonzo, the high cost of digital tax stamps keeps the cost of doing business high; hence, some manufacturers find value in avoiding the stamps.
“Maybe we need a different approach, if you bring down the cost of digital tax stamps, it stops being a barrier, and you get more players embracing it, hence driving volumes up.”
Kilonzo said that through the Farm for Success Program, Uganda Breweries is supporting people in farming communities who supply the organization with raw materials such as sorghum and barley used in alcoholic beverage production.
On an annual basis, Uganda Breweries invests Shs52 billion in farmers involved in the supply of raw materials.
“We are touching the lives of at least 50,000 farmers; we work with the National Agricultural Research Organisation (NARO) to improve the yields; we were very excited when the government came with the Parish Development Model (PDM) because we are exactly working with people in communities,” he stated.
Decarbonizing efforts
In April 2024, UBL commissioned a state-of-the-art Shs37 billion biomass plant.
The facility represents a substantial investment by UBL and excellent progress in its decarbonizing journey. Powered by locally sourced biomass materials, the plant also exemplifies UBL’s dedication to harnessing sustainable manufacturing while offering livelihood opportunities to local communities.
“We have cut our carbon emissions by 92% and by 2030, we want to be carbon neutral; we are almost there. What’s remaining is for our diesel generators for backup, but we are looking for the solution,” said Kilonzo.
The commissioner general of the Uganda Revenue Authority (URA), John Musinguzi, pledged to push for a review of the costs of digital tax stamps.
“The cost of implementing DTS is designed to be manageable and is outweighed by the benefits of improved tax compliance and the reduction of illicit trade. Our primary challenge is not the system’s expense but ensuring that all businesses comply with these necessary regulations,” he noted.
Since its introduction in 2019, DTS has significantly broadened Uganda’s tax base, with a notable increase in registered manufacturers and importers.
The system has been pivotal in curbing tax evasion and enhancing supply chain transparency across various sectors. However, resistance to full compliance in certain sectors continues to undermine its potential benefits.
“We have observed a significant improvement in sectors where compliance is high,” the CG noted.
URA statistics underscore that DTS not only serves as a regulatory tool but also stimulates economic activity by leveling the playing field among businesses.
