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Digital Tax Stamps Solution: A Case For The East African Region

Following the start of the implementation phase of the digital tax stamps solution in Uganda, there has been a lot of speculation as whether the solution will yield the results that Uganda Revenue Authority has projected. Since we have no time machine to check the future, the next best thing is to consider other places within the East African region where this same solution has been applied and examine if indeed there was a boost in their revenue collections.

According to Tanzania Revenue Authority Deputy Commissioner General Msafiri Mbibo, there has been a 33.7% increase in excise collections and a 30.6% increase in VAT collections from spirits and wines between February and October 2019 compared to the same period last year. In this period in 2018 the tax body collected 58.2 Billion Shillings as excise duty from spirits and wines but registered a dramatic increase to 77.8 Billion Shillings for the same period in the 2019. The story was the same with soft drinks, registering an 8.7% increase in excise duty collections and 19.5% increase in VAT collections between September and October, compared to what was recorded for the same period in 2018. The government of Tanzania, through Tanzania Revenue Authority rolled out phase 1 of the Electronic Tax Stamps (ETS) System by connecting 19 companies producing wines, spirits and cigarettes in  January 2019 and by  August, had effectively incorporated all alcoholic drinks, cigarettes, carbonated drinks and bottled water.

The ETS system was introduced to replace the physical paper stamps because the latter were linked to numerous incidents of tax evasion. According to Tanzania Revenue Authority director for Taxpayer Services and Education, Rrichard Kayombo, this move was geared towards improving tax administration and has significantly reduced tax evasion.

In Kenya, the Tax Stamp solution has been applied to other products like juices and other non-alcoholic beverages. Their biggest challenge was the illicit trade in tobacco products for which the Kenya government, through Kenya Revenue Authority, implemented the Excisable Goods Management Systems (EGMS). The success with Tobacco encouraged the tax body to roll out the digital solution for other excisable products like beer, cosmetics, bottled water, juices, energy drinks, soda and other non-alcoholic beverages.

On the whole, the region seems to be going digital when it comes to tax assessment and collections. Although the results are coming in even better than projected in the countries where the digital tax stamps are being used, the common feature in all the countries is the push back from manufacturers and importers. This has however, not discouraged or hindered the tax bodies across the region from implementing this solution that, according to statistics coming in from neighbouring nations, can help them optimize collections by plugging tax leaks. This is another step closer to a unified East African Community, with Kenya, Tanzania and now Uganda, using the services of the same Swiss company SICPA where lessons, benchmarking best practises and synergies may be enjoyed amongst the 3 countries.

The digital tax stamps solution has enjoyed government support across the region, the latest being a letter from President Yoweri Museveni of Uganda to the Finance minister, directing that the solution be expanded to all factories and even other taxes, not only excise duty. This support has given the solution a great boost and silenced the naysayers who were still resistant to the digital tax stamps solution.

By Amon Baita

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