Technology driving revenue collections, fighting illicit alcohol

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In Uganda, a staggering 65% of all alcohol consumed is illicit: It is unregulated, untaxed, and most of the time deadly.

The trade in illicit alcohol fuels addiction, disease and robs the nation of vital revenue needed for development.

As the adage goes, necessity is the mother of invention; the need to curb the illicit alcohol crisis, while boosting government coffers, has contributed to the birth of the Digital Tax Stamps (DTS) system aka Digital Tracking Solution. The solution means that all manufacturers and importers of the gazetted products are required to implement the DTS system by having their products affixed with digitally traceable tax stamps.

In the case of alcohol, by embedding secure digital stamps on every bottle, the country is transforming its fight against illicit alcohol into a dual victory for public health and economic growth.

Crackdown

Digital tax stamps are enabling the Government to crack down on illicit brews and alcohol production with precision.

Managed by SICPA Uganda—a global leader in authentication and traceability solutions—and overseen by the Uganda Revenue Authority (URA) and the finance ministry, the DTS system marks each unit of excisable goods with a tamper-proof digital stamp. These stamps are monitored in real time, making it nearly impossible for producers to evade taxes or operate outside the law.

According to finance ministry's principal economist Isaac Arinaitwe, the DTS programme is reshaping Uganda’s business landscape by fostering fairness and predictability.

“DTS has dismantled the unfair advantage previously held by non-compliant businesses,” he explained during a recent interview. “It ensures that all companies in high-risk sectors contribute fairly to tax revenues, promoting a healthier and more equitable marketplace.”

Reports indicate that DTS is yielding remarkable results. Informal spirit makers, once invisible to authorities, have been forced to register with the taxman, declare their production volumes, and formalise. As a result, URA surpassed its mid-year 2024/25 revenue target by sh322b.

SICPA Uganda, represented by General Manager Suzan Mweheire Kitariko - along with URA officials, during a tour of UBL Industries. They discussed the optimisation of the DTS solution on the sidelines. (Courtesy photo)

Health question

The system addresses critical public health concerns. Illicit alcohol, often brewed under hazardous conditions, has caused a lot of damage in several communities, especially in urban slums and rural areas. In Arua and Kampala alone, 83% of surveyed patrons admitted to drinking illicit alcohol within the past week, with youth drinking levels alarmingly high.

Socioeconomic factors, including poverty, peer pressure and the lack of parental guidance, compounded the problem, causing the youth to buy cheap, unregulated options.

By enforcing the stamping of all excisable goods, DTS forces producers to adhere to safety standards and regulatory frameworks. Many informal brewers who previously operated unchecked are now part of the tax net, enabling better oversight and reducing the prevalence of dangerous brews.

URA commissioner general John Musinguzi said even niche markets like kombucha manufacturers must comply or face closure. “This is good for achieving our objective of cleaning the market of untaxed products”.

Business implications

Importers or local manufacturers of the gazetted goods are required to register their premises or packaging space for Excise Duty in line with section 5 of the Excise Duty Act. They also need to install the DTS equipment at the registered premises.

Those who do not comply with these regulations will be penalised following penalty provisions in section 19B of the Tax Procedures Code Act, 2014, including paying double the tax or sh50m whichever is higher.

GDP-to-tax ratio

Currently, ACODE says Uganda’s tax-to-GDP ratio stands at 13.9%, which is still well below the sub-Saharan average of 16%. Whereas Uganda has made significant efforts over the years to generate domestic revenues, these efforts are still not sufficient to enable the country to meet its budgetary requirements.

Therefore, Uganda’s adoption of DTS offers a blueprint for reversing this trend, addressing both revenue shortfalls and broader social issues. Through technology and taxpayer co-operation, the country is building a safer, fairer, and more inclusive economy.

This story was first published in New Vision print edition of May 27, 2025.