URA to examine challenges related to digital tax stamps

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

Speaking at the launch of a report commissioned by the Uganda Private Sector Foundation on the impact of digital tax stamps on the manufacturing industry, held by PwC in Kampala yesterday, John Musinguzi Rujoki, Commissioner General of the URA, said: The government is ready to commit to achieving the long-term objectives of improving Uganda’s manufacturing capacity and value addition, while expanding the country’s tax base.

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

Mr Rujoki was responding to a report presentation by PSFU in association with PwC.

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

It notes that stamps, which cost between 110 and 13 shillings 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 less than in Rwanda.

However, Rujoki responded that the contract signed between URA and digital revenue stamp service provider – SICPA – allows for a gradual reduction in the cost of stamps, noting that the cost of stamps for spirits and beer had already been reduced. , among other products.

He also acknowledged that countries that had previously adopted digital tax stamps had already reached a progressive threshold for a price reduction, and attributed this to different factors, such as better compliance that has increased declarations, which are significant enough to cause a reduction.

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

The report also noted a decline in excise tax collection, which Rujoki said would be further investigated to determine whether it was due to the current difficult economic environment or whether there were companies that were not complying.

At the same event, Andrew Kilonzo, CEO of Uganda Breweries, said the costs associated with digital tax stamps had increased the cost of doing business, and urged the government to find mitigation measures.

“We are spending 20 billion shillings on digital stamps and another 8 billion shillings on other production chains, while we are affected by the illicit alcohol trade,” he said, adding that in addition to paying excise taxes, the paper used to Implementing digital tax stamps is subject to value. additional tax, urging the government to apply a zero rate to the papers.

However, Mr Rujoki noted that while some areas need to be studied carefully, some manufacturers, such as those in the Kombucha business – many of whom were involved in the illicit alcohol trade – who did not pay taxes but instead occupied the market where those who pay for supply products had been included in the taxable scope, thus creating a level playing field.

A 2022 report by Euromonitor indicated that only 35.5 percent of alcohol, equivalent to 543,331 liters in Uganda, is sold legally, while a large amount is illicit and contributes little or no tax revenue.

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

Since then, the seals have been implemented on various products, including beer, spirits, wine, mineral water, cigarettes, soft drinks, sugar, cooking oil and cement, among others.