We introduced digital stamps to address revenue leakages , says finance ministry
Manufacturers say the price of digital tax stamps has increased the cost of doing business. Photo / File
What you need to know:
- The Ministry of Finance says the introduction of digital tax stamps had to come at a cost to fund the establishment and supervision of the technology and cost of stamps
Ministry of Finance has said digital tax stamps had to be established with an implementation cost to eliminate tax leakages.
Speaking in an interview at the weekend in response to concerns by manufacturers over the cost of the stamps, Mr Moses Kagwa, the Ministry of Finance director of economic affairs, said government introduced digital tax stamps to mitigate under declaration of sales and control quality among excisable products, but this had to come at a cost to fund establishment and supervision of the technology and cost of stamps.
However, he noted the contract under which the solution is being implemented includes clauses for price reduction as usage volumes increase.
“Digital tax stamps had to come at a cost. Someone had to establish the technology, supervise it, and produce the stamps. However, it is important to note that the cost has been going down depending on the volumes. There are negotiations … for the cost to drop further, but the question that still lingers is, by how much?” Mr Kagwa said.
Last week, manufacturers under Uganda Manufacturers Association and Private Sector Foundation Uganda (PSFU) petitioned the Parliament Finance Committee over digital tax stamps, indicating that the stamps had increased the cost of doing business yet it was difficult to pass the cost on to consumers.
Dr Julius Byaruhanga, the PSFU policy and business development director and other officials, presented the impact of digital tax stamps on manufacturing report to the committee, noting that government should not transfer the burden of implementing a tax measure to manufacturers.
“A tax administration measure has been transferred to the private sector. We are saying if it is an administration measure the burden should be borne by government, not the private sector,” he said.
At the weekend Finance Minister Matia Kasaija, said government will commission a study to assess the performance of digital tax stamps.
Government, he said, was committed to closing tax leakages through digital tax solutions, noting that while manufacturers had raised some concerns, without a study, it was difficult to conclude whether the issues raised were valid.
“They [the private sector] could be right, and government could also be right. So, I need to commission a study. That is when we will be able to assess the impact,” he said.
In May, Uganda Revenue Authority (URA) Commissioner General John Rujoki, said that the agreement signed with the implementing company included clauses requiring a reduction in the cost of stamps when certain milestones are achieved, noting that the cost had already reduced for beer, spirits, and kombucha, among others.
He also argued that focus should be put on the broader benefits, noting that digital tax stamps had cleaned the market of illicit goods.
