KAMPALA – The Alcohol Manufacturers Association of Uganda and the Uganda Water and Juice Manufacturers Association have petitioned government and President Yoweri Kaguta Museveni, to delay levying the costs of Digital Tax Stamps (DTS) on them, saying that both the costs and the timing are not good for the business.
In an online petition, titled: Save Uganda’s Farmers, Retailers and Distributors’ Livelihoods – say #NoToTaxStampCosts (http://chng.it/Y9pNBJnMds) the beverages manufacturers, said that their member industries have complied with the law to affix digital stamps to their products, but prayed that government continues to bear the costs of the stamps from the consolidated fund.
Some of the associations’ members such as Nile Breweries Limited, Uganda Breweries Limited, Century Bottling Company Limited, Crown Beverages Limited and Hariss International are already some of Uganda’s largest taxpayers. DTS as a tax compliance solution, went came into force in October 2019, amidst a push and pull with the manufacturers who argued that the cost of implementation, versus the expected tax yield did not make much economic sense.
The stamps that are mandatory on spirits, tobacco, beer, water, sodas and wines- either produced in Uganda or imported are supposed to cost Shs 15 per water bottle, Shs 50 for beer bottles, and Shs 185 for wines and spirits. As an interim measure, the government agreed to foot the cost of implementation. However, the government has said that effective July 1, 2020, every manufacturer should meet their own costs of implementation, thus the petition.
“All our efforts to obtain reassurance from the Government that it will cover the DTS costs beyond 30 June 2020, have so far proved futile. We have been left with no other alternative but to request your help. If the industry has to pay for tax stamps, the livelihoods of farmers, retailers, distributors, and the public will all be drastically affected. The situation is even more pressing as a result of the Covid-19 pandemic which has severely impacted the operations and extensive supply chains of the very industries that will be affected by the imposition of DTS costs, “the manufacturers say in their petition to President Museveni.
The petitioners have asked President Museveni to weigh in and ensure the government continues to meet the costs of DTS, “allowing manufacturers, farmers, retailers, distributors, and the public to survive the ravages of covid-19.”
In the online petition, titled: Save Uganda’s Farmers, Retailers and Distributors’ Livelihoods – say #NoToTaxStampCosts that can be found on this link: http://chng.it/Y9pNBJnMds, the two associations say, that the “Shs 15 billion per manufacturer per year cost will radically increase the costs of doing business for Ugandan manufacturers, with far-reaching consequences for all parts of their Ugandan value chains, including farmers, retailers, distributors, government and consumers.”
The petitioners fear that directly charging them for the stamps will increase the cost of operating by at least 20 percent, which costs will be reflected in increased cost of their products that will, in turn, upset sales volumes as previous experience shows, every time there is a price increase, consumers turn to cheaper and illicit solutions that are both unsafe and do not pay tax. They further argue that declining sales volumes will have negative ripple effects down the entire chain of distributors, retailers, and farmers.
According to industry statistics, the industry engages up to 50,000 contract farmers annually who grow especially the raw materials such as sorghum, sugar cane, barley, milk, cassava, and maize. Now the petitioners say, these farmers, could lose up to Shs10 billion in household incomes as a result of reduced demand for raw materials. Declining demand, could also affect the incomes of up to 88,000 retailers and the livelihoods of up to 352,000 households that they support.
“The lower manufacturing output could lead to lower overall tax revenue from reduced sales. There will also be a further reduced tax revenue from consumers switching to untaxed illicit goods. As a result, the government could also lose up to Shs6.6 billion in tax revenue, and its policy of low-cost domestic manufacturing undermined. Government’s post-Covid-19 recovery plan will also be defeated,” further contends the petitioners.