East African Business Council (EABC) has called for a review and reduction in the cost of the Digital Tax Stamp (DTS) system, which is implemented in the region to improve revenue collection on excisable goods.
The DTS system involves stamping products with a digital stamp by marking security features and codes applied on goods or their packaging or containers to prevent counterfeits and enable tracking and traceability capabilities.
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This is used by regional revenue authorities to control supply chains for the production, import, export, and distribution of excise products.
Some of the products under DTS in Rwanda include cigarettes, beer, wine, and spirits.
EABC says that despite this innovative solution, the cost of the stamp differs significantly in each country and the stamp fee is additional to the excise duty tax payable under the country’s respective Excise Act.
Basically, this means there is double taxation for manufacturers.
Besides the cost of stamps, manufacturers also face challenges of equipment installation and operation of the system.
A recent study commissioned by the Confederation of Tanzania Industries (CTI) shows the average acquisition cost for the digital print system was approximately $634,000 for beer and $21,567 for soft drinks.
Jean Bosco Kalisa, Chief Executive of EABC, noted that wider public stakeholders’ engagement and inclusion of manufacturers’ input in the re-negotiation process of a better digital tax stamp system is important.
According to him, this would ease the development and rollout of alternative DTS solutions that are more acceptable to all stakeholders, including Small and Medium Enterprises.
"The reduction in costs would enhance compliance of small-scale manufacturers with DTS regulations, improve sustainability, and further boost revenue collection. A relatively lower and uniform price for DTS would make it easier for firms to adopt the new technology,” he explained.
As of now, the cost of the stamps paid by the manufacturers goes to the foreign DTS provider and not to the government's revenue authority. Hence, the EABC urges revenue authorities to explore ownership of the digital tax stamp system through the Build, Operate and Transfer (BOT) model to limit capital flight.
According to the council, this will ensure that the DTS system does not impose any financial burden on manufacturers in the long run.
Kalisa noted that revenue authorities should also sensitize the public on the validation of tax stamps to improve compliance and discourage counterfeiting in the region.
"In principle, consumers of excisable goods should be able to verify the authenticity of the stamps through the applications provided by the revenue authorities,” he said.