Uganda introduces digital tax stamps use on sugar, cement

Workers off-loading bags of sugar. A number of products will be required to have digital stamps fixed on them as a measure which is designed to curb tax leakages and trade in illicit products. Photo | File

What you need to know:

  • Uganda becomes the fourth country among the EAC member states to adopt digital stamps in deliberate efforts to plug revenue leakage loopholes

Dar es Salaam. The Uganda Revenue Authority (URA) started using digital tax stamps (DTSs) on cement and sugar earlier this month as East Africa banks on technology to boost public revenue collections.

Uganda becomes the fourth country among the member states of the East African Community (EAC) to adopt digital stamps in deliberate efforts to plug revenue leakage loopholes.

Digital stamps enable the government to use modern technology to obtain real time production data from manufacturers. This aids the government in curbing revenue leakages and also in determining in advance the amount of tax to be paid as excise duty, value-added tax and income tax.

Uganda adopted digital stamps in October following in the footsteps of Kenya, Rwanda and Tanzania in implementing DTSs, which are deemed to be the solution to boosting revenue collections and filling leakages.

The adoption of DTSs on Uganda’s sugar and cement followed an engagement that country’s taxman had with manufacturers of sugar and cement last month.

Actual rollout on the two products was implemented on April 1, 2021, according to media reports.

DTSs are a mark or label applied on goods and their packaging. The stamps contain security features and codes to prevent counterfeiting of goods through its trace and track capabilities. The launch will take more than two months, from April 1 to June 1. The notices for stamp fees for sugar and cement and their manner of fixation were gazetted on January 1, reports from Uganda say.

Each 50-kilogramme (kg) bag of cement will have a stamp bought at Ush135 (about Tsh80). Cement bulkers will pay Ush60,000 (about Tsh35,000) per lorry-load while each bag of sugar will have a digital stamp worth Ush39 (about Tsh21).

Uganda’s assistant commissioner for Large Taxpayers, Mr John Katungwensi, said that even though the products expire, the stamps would not.

“The stamps do not have expiry dates. It is you who declare on the web portal the details of production, expiry and the Stock Keeping Unit (SKU) of the product,” he told manufacturers last month as quoted by Ugandan newspapers. “You must put a serial number on each product. You can declare the stamp as unused by declaring it on the web portal as damaged.

“It is you who decide when to activate the system: upon packaging or when you dispatch products for sale.”

Data show that, by March 2021, URA had recovered over Ush3.5 billion in revenue as a result of netting 33 digital tracking solution flouters who were manufacturing, selling, exporting or distributing gazetted goods without the tax stamps.

In Tanzania, the government announced plans to adopt the electronic tax stamps (ETS) system in June 2018 and the first phase was conducted on January 15, 2019 whereby stamps were installed on 19 firms producing alcohol: wine and spirits.

Phase two of the project was rolled out on August 1, 2019 when ETSs were stamped on sweetened flavoured water and other non-alcoholic beverages, like energy and malt drinks and soda. The third phase, which involved enrolling electronic stamps on fruit juices (including grapes), vegetable juices (under Heading 20.09), bottled drinking water, was conducted November 1, 2020.

However, there have been reports of fake electronic tax stamps being sold illegally by some unscrupulous individuals in Kilimanjaro and Arusha. Last month, the Tanzania Revenue Authority (TRA) announced that it was working with other state agencies to investigate the presence of fake ETSs on spirits that were sold in some pubs in the two regions.

That came within days after TRA in Kilimanjaro Region reported to have arrested a man - who was identified by only one name: ‘Kimario’ - in a deliberate effort to dismantle the network of individuals who engage in distribution of fake ETSs.

In Kenya, the Excisable Goods Management System (EGMS) was initially launched in October 2013 to cover tobacco, wines and spirits - and, later, beer in early 2016.

It was until November 2019 that the Kenya Revenue Authority announced the move to digitally tax bottled water, juices, energy drinks and soda was viewed as a way to deal a blow not only on counterfeiters, but also on tax evaders.

East Africa has borne the brunt of cross-border illicit trade -- including counterfeits, smuggling and bootlegging, with Tanzania, Kenya and Uganda reportedly losing a combined $3.2 billion in annual revenues to illicit trade.