Uganda implements digital tax stamps as region banks on technology to defeat counterfeits, tax evasion

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

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

Digital stamps enable the government to use modern technology to obtain production data on a timely basis (real time) 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 digital tax stamps which are deemed to be the solution to boosting revenue collections and filling leakages.

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

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

DTS is a mark or label applied to goods and their packaging and contains security features and codes to prevent counterfeiting of goods through its trace and track capabilities.

The launch will ride over a two months’ period from 1st April to 1st June 2021 even though the notices for stamp fees for sugar and cement and their manner of fixation were gazetted on January 1, 2021, reports from Uganda say.

Each 50kg bag of cement will have a stamp bought at Ush135 (about Tsh80), Cement bulkers will pay Ush60,000 (about Tsh35,000) per truck 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, whether upon packaging or when you dispatch your products for sale.”

Data from Uganda 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 caught manufacturing, selling, exporting or distributing gazetted goods without the tax stamps.

In Tanzania, the government announced plans to adopt the ETS system in June 2018 and the first phase was conducted on January 15, 2019 whereby stamps were installed on 19 companies that produce alcohol, wine and spirits.

Phase two of the project was rolled out on August 1, 2019 when ETS’ were stamped on sweetened flavored 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 grape must), 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, Tanzania Revenue Authority (TRA) announced that it was working with other state agencies to investigate the presence of fake Eletronic Tax Stamps (ETS) on spirits that were sold in some bars across 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 as Kimario -- in a deliberate effort to dismantled the network of individuals who engage in distribution of fake ETS.

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 Kenya Revenue Authority announced the move to digitally tax bottled water, juices, energy drinks and soda in water was viewed as a way to deal a blow to not only counterfeiters but also 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.