________________

The Private Sector Foundation Uganda (PSFU) has released a report titled, “The Impact of Digital Tax Stamp (DTS) in Uganda.”

The report claims that the implementation of DTS has led to an average 16% increase in operational expenses for manufacturers, 56% of manufacturers have experienced a surge in production costs, while 50% have reported diminished profitability.

According to the report, the high costs of DTS have disproportionately affected Small and Medium Enterprises (SMEs) with limited capital resources.

However, the report also states that DTS costs have not affected consumer prices. This is a significant finding, as it alleviates concerns about the potential rise in retail prices due to the higher cost of stamps.

Supporting this, a price study published by the International Tax Stamp Association corroborates that the additional costs have not affected consumer prices. This outcome suggests effective management of cost absorption within the supply chain, ensuring that tax integrity measures do not burden consumers.

Stephen Asimwe, Executive Director of PSFU, during the launch of the DTS impact study report, stated that most costs incurred are absorbed by the manufacturers and not passed on to consumers for fear of affecting consumer demand. This has led to business closures in sectors like alcoholic beverages.

Companies that have ceased operations due to high DTS costs, as identified by the Uganda Alcohol Industry Association (UAIA), include Global Distillers Limited, Four-Star Beverages Limited, Pramboot Distillers Limited, Gama Distillers, Kasese Distillers, and London Distillers Limited, among others.

According to URA, since its inception in 2019, DTS has been a catalyst for significant investment and growth across various sectors, indicating a trend towards expansion and modernization.

For example, Uganda Breweries Limited (UBL) made substantial investments in a new beer production line, facilitating local production of previously imported products. UBL also enhanced its spirits manufacturing capabilities, becoming a leader in the sector.

Asiimwe also noted that Uganda's stamp prices are more expensive than those in other East African countries, despite sharing the same supplier, SICPA. According to URA, it sets different prices for excise stamps based on the category of products, ensuring that the stamp price remains proportionate to the products' retail price. This practice is consistent across countries where DTS has been implemented.

Andrew Kilonzo, Managing Director of Uganda Breweries Limited, called for a review of the DTS implementation framework to optimize the system's cost-effectiveness and establish a mechanism for manufacturers and importers to recover incurred expenses.

Private Sector Foundation speaks out on digital tax stamp

According to the report, the high costs of DTS have disproportionately affected Small and Medium Enterprises (SMEs) with limited capital resources.

Private Sector Foundation Uganda (PSFU) members display the report. (Courtesy)

Apollo Mubiru

Journalist @New Vision