Manufacturers seek reduction in electronic stamps costs despite benefits

Tuesday May 19 2020


By Alex Malanga @ChiefMalanga

Dar es Salaam. Electronic Tax Stamps (ETS) have had a positive impact on revenue collection and on curtailing the entry of illicit products into the market.

However, manufacturers now want a reduction in costs associated with the use of ETS on excisable goods.

Through the Confederation of Tanzania Industries (CTI), they have issued a proposal to the taskforce on tax reforms, suggesting a reduction in ETS charges as a way of lowering their operational costs.

But available data shows that ETS has had some encouraging results on revenue collections which - along with other administrative efforts in revenue mobilization by Tanzania Revenue Authority (TRA) - have had a positive impact on boosting government coffers.

The imminent implementation of ETS resulted into increasing the volume of domestic legal products and a drop in illegal products in the market thereby increasing collection of taxes.

For instance, available data shows that exercise tax collections on domestic spirits rose by a cool 74.4 percent (an increase of Sh13.8 billion) during the first quarter of 2020 compared to a similar period in 2018 before the ETS had been rolled out.


Similarly, Value Added Tax (VAT) on domestic spirits rose by 22.8 percent during the first quarter of 2020 compared to a similar period in 2018.

Excise duty collections on domestic wine also rose by 871.6 percent during the first quarter of 2020 compared to a similar period in 2018 while that of VAT on the products (domestic wines) rose by 69.7 percent during the same period in 2018.

ETS went live on soft drinks in August last year (2019).

A comparison of exercise duty collections for the period from August 2019 to March 2020 is 11.7 percent more than what was collected during the period between August 2018 to March 2019.

VAT has gone up by 8.8 percent during the same comparative periods.

ETS also comes with a system that allows the government to effectively fight the trading of illicit trade and illegal product into the market, thus protecting local producers from unfair competition.

But manufacturers say it was unfair for them to pay a uniform fee of $20 per 1,000 locally and imported cigarettes.


They also say that the new system has resulted into an additional cost of $20 and $8.55 on every 1,000 units of spirits and beer respectively.

In its recommendations, CTI is suggesting an $8.55 ETS charge on cigarettes that have been produced using at least 75 percent domestic Tobacco Content (DTC). The $20 charge should only apply to imported ones.     

“The implementation of the ETS which kicked off in January 2019 has imposed a big financial burden to manufacturers,” reads part of CTI document seen by The Citizen.

The manufacturers are suggesting a meeting that will bring them together with TRA and with a Swiss company that supplies the taxman with the ETS system, SICPA, so they can together discuss the way forward.

The government announced plans to adopt the ETS system in June 2018.

The first phase of the ETS rollout was conducted on January 15, 2019 whereby stamps were installed on 19 companies that produce alcohol, wine and spirits.

The second phase - which involved soft and carbonated drinks as well as bottled water - was rolled out on August 1 last year.  

However, the taxman is yet to issue the public notice for ETS rollout on bottled water and juice, suggesting that the old paper stamps were still being used for calculating tax for the products.