Ugandan manufacturers demand harmonisation of digital tax stamps across East Africa

Ugandan manufacturers and business operators have said the failure of the government to harmonise the costs of Digital Tax Stamps (DTS) with the other East African Community countries is promoting unfair competition.

Appearing before the Parliamentary Committee on Finance on 30th October 2024, the group said the cost of the digital tax stamp in Uganda is 38 percent higher when compared to Kenya and Tanzania.

“Members of the manufacturing sector have consistently expressed their support for the Government efforts in implementing DTS. However, it is evident that the current fees associated with DTS are excessively high, leading to elevated operational costs for the sector,” said Julius Byaruhanga, the Director of Policy and Business Development at the Private Sector Foundation on Uganda (PSFU).

The private sector leaders say the high charges make the final price of goods and services expensive, leading to an increase in illicit trade because Uganda is a price-sensitive market.

“Our market is highly price sensitive. If you visit any small local bar, you will find that 95 percent of the alcoholic drinks can’t be traced; they aren’t tax compliance and don’t have labels of alcoholic content,” Byaruhanga said.

Juliet Nagginda, the Senior Manager at Tax Services at PwC Uganda, said the high costs of the stamp affect the operational costs and returns for the business community.

“For every 100 shillings Exercise Duty they pay, they incur about 16 shillings to comply and this is the cost that they are bearing because many of them can’t pass the price to the consumers because of the sensitivity of the goods,” she said.

Allan Ssenyondwa, the Director of Advocacy at the Uganda Manufacturers Association, says that the current situation where each country has different rates poses challenges to the competition playground and interferes with other East Africa Common market regulations.

“Can we try and either harmonise across the region or reduce the cost so that the entire region has similar prices? It’s better that way because we are in one common market.”

He suggested that in order to ease the costs of DTS, there should be a focus on engaging companies that offer similar solutions at cheaper prices, saying that different costs may lead to illicit business activities.

The Chairman of the Parliament Finance Committee Amos Kankunda, said that the committee will look at the issues raised and discuss them with the Government to ensure more productivity of the manufacturers.

Records show that in Uganda, DTS costs for wines and spirits are 110 Uganda Shillings and 36 for beer compared to 134.88 for wines and spirits and 80.93 for beers in Kenya. In Tanzania, the Digital Stamp costs 51.75 Uganda Shillings for wines and spirits, 23.02 for locally produced beers and 27.58 for imported beers.

In Uganda, the use of DTS was rolled out in the Financial Year 2019/20 following the launch of the Domestic Revenue Mobilization Strategy by the Finance Ministry. DTS was also aimed at addressing revenue leakages.