ONE year after the Tanzania Revenue Authority (TRA) rolled out the first phase of Electronic Tax Stamps (ETS) for products which are subjected to excise duty, manufacturers have mixed reactions over the newly introduced system.
The digital stamps were introduced by the tax collector in January last year to replace paper stamps which were prone to abuse, leading to tax evasion as well as flooding of counterfeit products in the local market.
Nevertheless, while local producers and importers of excisable products hail ETS for curbing counterfeit goods, on one hand they complain on the other on what they describe as high costs of the digital stamps.
The Minister for Finance and Planning, Dr Philip Mpango, while presenting budget estimates for the fiscal year 2018/2019 in June 2018, had announced plans to introduce digital stamps to replace paper amid protests from manufacturers that the decision would increase production costs.
However, TRA went ahead and awarded a contract to a Swiss firm, Société Industrielle et Commerciale de Produits Alimentaires (SICPA), for supply, installation and provision of supporting software and hardware for ETS management system.
Speaking recently to members of the Parliamentary Standing Committee on Budget, the Director for Legal and Corporate Affairs at Tanzania Cigarette Company (TCC), Mr Godson Kizila, said the system has among others created a level playing field for manufacturers in terms of tax compliance.
“The digital stamps have helped us to curb counterfeit cigarettes as well as tracking and tracing of our products,” Mr Kizila told the parliamentarians.
The parliamentary committee had visited TRA headquarters and selected manufacturers who have been installed with ETS to learn how the system works.
It was the same parliamentary committee that had opposed the introduction of ETS when the idea was moved in the August House by Dr Mpango in June 2018.
However, when it visited TCC and Serengeti Breweries Limited (SBL) in Dar es Salaam, the committee was told that the digital stamps have had both positive and negative outcomes for manufacturers and importers.
For instance, Mr Kizila told the MPs that while ETS have enabled curbing of counterfeit products, it has as well increased their production costs by up to 319 per cent.
“The current rate of $20 per 1,000 stamps from $4.77 per1000 stamps translates into an increase of 319 per cent which is too high.
“The stamps have impacted the company’s profitability, cash flow and dividends payable to shareholders,” he lamented.
The SBL corporate relations director, Mr John Wanyancha said the aim of ETS was to protect consumers against illicit and counterfeit products.
He noted that ETS also ensures that manufacturers do not under-declare their production volumes.
The TRA Deputy Commissioner for Domestic Revenue, Mr Msafiri Mbibo, said during the tour that the tax collector had engaged manufacturers in a number of issues including ETS as well as other tax related issues.
“Both SBL and TCC have expressed satisfaction over ETS because it has enabled their businesses to grow,” he pointed.
However, the chairman of the parliamentary committee, Mr Mashimba Ndaki, assured the manufacturers that they will engage relevant government institutions to ensure that all concerns are addressed.