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URA Pledges Cost Review of Digital Tax Stamp Amid Manufacturers’ Grievances

URA Pledges Cost Review of Digital Tax Stamp Amid Manufacturers’ Grievances

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URA Pledges Cost Review of Digital Tax Stamp Amid Manufacturers’ Grievances

by Muhamadi Byemboijana
May 8, 2024
URA Pledges Cost Review of Digital Tax Stamp Amid Manufacturers’ Grievances

Photo by URA.

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The Uganda Revenue Authority (URA) has committed to reviewing the costs of Digital Stamps following complaints from stakeholders, particularly manufacturers.

According to a survey commissioned by the Private Sector Foundation (PSFU) and conducted by PricewaterhouseCoopers (PwC) on the effects of Digital Tax Stamps, it was noted that the current structure and associated fees are high. Adding that it has led to elevated operational expenses, impacting growth and tax revenue generation.

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The survey suggested a re-evaluation of the existing contract for the DTS system and renegotiation of stamp costs, considering their impact on the manufacturing sector.

“This will require a thorough analysis of similar regional and global systems. By leveraging this comparative information, the government should be able to achieve independence from stringent contract terms, address manufacturers’ concerns, increase revenue collections, and reduce illicit trade as per the objectives of introducing the DTS system in Uganda,” the survey read.

A Digital Tax Stamp is a marking applied to goods or their packaging to prevent counterfeiting. In Uganda, these stamps are affixed to manufactured and imported goods to ensure authenticity. They contain codes used to prevent counterfeiting.

DTS was introduced in Uganda on November 1, 2019, as a tax administration tool in the excise duty system with aims to protect government revenues, combat trade in counterfeit products and illicit trade, enhance fair competition, and provide real statistical data for tax policy and administration.

The adoption of DTS stemmed from concerns about underreporting production figures and resultant excise duty from local manufacturers and importers. While initial evidence supporting these concerns was limited, DTS has since been used to safeguard government revenues and curb illicit trade in Uganda.

Andrew Kilonzo, the Managing Director of Uganda Breweries Limited, stated that manufacturers incur heavy costs in purchasing and affixing digital tax stamps, adding that DTS represents an additional financial burden.

Sarah Kagingo, the PSFU Board Vice Chairperson, called for collective efforts to gain comprehensive insights into DTS’s impact on the manufacturing sector.

She emphasized the need for enhanced collaboration between the private and public sectors for evidence-based policy formulation.Kagingo also stressed the necessity to reduce costs associated with DTS implementation, noting recent studies aimed at understanding cost drivers in the manufacturing sector. She expressed hope that the government would utilize these findings to inform policy.

In response to the report and concerns raised, John Musinguzi Rujoki, the URA Commissioner-General, stated that the cost of implementing DTS is designed to be manageable and outweighed by the benefits of improved tax compliance and reduced illicit trade.

He highlighted that the primary challenge lies in ensuring all businesses comply with necessary regulations.”Since its introduction in 2019, DTS has significantly expanded Uganda’s tax base, with a notable increase in registered manufacturers and importers,” Musinguzi noted.

“The system has been instrumental in curbing tax evasion and enhancing supply chain transparency across various sectors. However, resistance to full compliance in certain sectors continues to undermine its potential benefits.”

Musinguzi explained that significant improvement has been observed in sectors with high compliance, and the costs of DTS have been reviewed accordingly.

“As Uganda continues to modernize its tax system, the role of DTS remains crucial,” he added. “The focus now is on enhancing compliance across sectors, including Kombucha products, to fully realize the benefits of DTS and support Uganda’s broader economic goals.

Tags: Digital Tax StampsJohn Musinguzi RujokiSoft PowerSoft Power NewsSoftPowerSoftPower NewsTop News UgandaTop Uganda NewsUBLUganda

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