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Beverage producers want govt to bear digital tax stamps cost
A worker checks a beer in a production line at Uganda Breweries Ltd. Beverage companies say they are not in position to bear the cost of implementing digital tax stamps and have called for government intervention. FILE PHOTO
What you need to know:
- This target translates into a revenue effort of 14.3 percent of GDP. To achieve this target, we will further roll out use of digital tax stamps and expand the range of products covered in order to deter under-declaration of production and importation,” Mr Kasaija said.
Beverage manufacturers want the cost of implementing Digital Tax Stamps (DTS) be met by the government.
A separate report presented to the Parliamentary Committee on National Economy by the local beverage manufacturers showed that the closure of bars, restaurants and social gatherings due to Covid-19 has cost government at least Sh25b in revenue in the last three months the industry would have otherwise generated.
In a letter dated May 22, 2020 to the Minister of Trade, Industry and Cooperation Ms Amelia Anne Kyambadde, the beverage industry players noted that Covid-19 pandemic is already hitting the beverage sub sector, including makers and processors of Juice, water and alcohol.
The letter authored by the Executive Director of Uganda Manufactures Association (UMA), Mr Daniel Birungi, regarding the implementation of the DTS amidst the Covid-19 pandemic, indicated that industry’s production capacity has reduced by at least 40 per cent and the sales’ revenues declining by between 50 to 65 per cent.
With the rolling out of the DTS beginning next month, manufacturers of water, sodas, spirits, tobacco and wine among others, said they are not in position to bear the Shs15b cost, asking the government to pick up the bill as it had earlier indicated.
“Hon. Minister, the businesses in this sub sector continue to face the threat occasioned by the forthcoming end to the government period of payment for the DTS. This will result in additional costs on the already financially distressed sector players with a potential to result in job cuts and even closures,” reads the correspondence in part.
Uganda Manufacturer Association (UMA) in the letter, said it would like to emphasise that government continues to bear the cost of implementation.
This is because the Shs15billion cost incurred per manufacturer annually will lessen the cost of recovery to the industry, which needs to rebuild the marketplace.
Should the government pick up the cost, it will in turn allow the industry to contribute to the economy in terms of investing in opportunities to redevelop the trade and support the trading outlets/ shops adversely impacted by the lock down measures.
The industry will also focus on financing opportunities to redevelop the different value chains impacted during the pandemic, supporting at least 44,000 farmers growing grain and cereals in Acholi, Ankole, Busoga, Lango, Kigezi, Sebei, Teso, Toro and West Nile,” Mr Birungi said in the letter which the Minister of Finance is also copied in.
Should the government heed the call, the industry players said they will be able to normalise production, maintain staff and suppliers, thereby protecting jobs and be able to pay other taxes.
UMA research into the impact of additional costs on manufacturers’ revealed that manufacturers would inevitably pass on the full DTS cost to the final consumer through increased pricing.
Budget speech
In a Budget speech delivered by the Minister of Finance, Mr Matia Kasaija, last week, it appears as if the government mind to implement the DTS is set.
“Madam Speaker, next financial year’s revenue target is Shs21.8trillion, comprised of tax revenue amounting to Shs20, 219 billion and non-tax revenue of Shs 1,591 billion.
This target translates into a revenue effort of 14.3 percent of GDP. To achieve this target, we will further roll out use of digital tax stamps and expand the range of products covered in order to deter under-declaration of production and importation,” Mr Kasaija said.
He continued: “Digital stamps ensure that goods on the market meet the required health and safety standards. I also know that some of you are unhappy about it but it will help us to know what is going on.”
Tax leakages
Uganda Revenue Authority’s move to introduce DTS, is one of the key tax measures meant to close tax leakages.
The implementation of the DTS solution is expected to combat counterfeit products on the market and protect consumers’ health and manufacturers’ earnings. It is also expected to enforce compliance through real-time and accurate declarations by manufacturers.
