Parliament queries sh60.8b digital tax stamps project

TAXATION |

Finance officials Tuesday had a hard time explaining why Uganda Revenue Authority (URA) paid sh60.8b to a Swiss company — SICPA against Parliament's resolution not to do so.  

SICPA is a Swiss digital security company contracted by the URA to install digital tax stamps.

The system was developed to track and trace products from production or importation to the final distribution. It was meant to be applied to only local manufactured or imported excise goods such as cigarettes, beers, spirits, wines, soda, and water.

According to documents seen by New Vision, the system was introduced to protect government revenues, combat trade in illicit, substandard or counterfeit products, protect consumers against harmful products and enhance fair competition in the market.

The company was contracted at a cost of sh129b when fully implemented.

Digital tax stamps are physical paper stamps that are applied to goods or their packagings, but in this case, contain security features and codes to prevent counterfeiting.

In May 2019, the then URA commissioner general, Doris Akol, presented the budget request to Parliament but the House declined to approve it, citing irregularities in the procurement of the company. The money was presented a few days to the end of the budget process. It was never among the unfunded priorities of URA and the company was single-sourced, denying local companies opportunity to compete.

Rejected

The budget was rejected by both the parliamentary committee on finance that supervises the activities of URA and the budget committee that scrutinises the budget.

At the time, the MPs directed that the money should not be approved until a thorough investigation of the project was done.

Akol explained at the time, that the money was not included in the budget because after local manufacturers refused to incur the costs of the stamp, Cabinet discussed the matter and agreed that the Government incurs the cost of the stamp for the first year and later shift it to the manufacturers. Charles Ilukor (MP Kumi County) complained that by the time Parliament rejected the budget, it required an analysis of what the Government was supposed to get in return.

"You never came back to us. Now you are back after spending the money and you want us to approve it. What was the purpose of bringing it in the first place?" he asked.

Cecilia Ogwal (Dokolo Woman MP) amused the committee when she said the minister should not even present the request.

"For this, do not even bring it for approval, it was rejected," she said sending members into laughter.

Bahati informed the members that the project was good, all he needed to do was to convince them of its necessity.

"This is important but we have to continue convincing you that we need more revenue," he said.

Lugoloobi asked the officials to table to the committee a cost benefi t analysis and a report from the companies that are already implementing the project.

Bahati on project

During the meeting yesterday, state minister for finance David Bahati informed the budget committee, chaired by Amos Lugoloobi, that the ministry had paid sh60.8b to cater for outstanding payments to SICPA Uganda Limited for the digital tax stamps solution implementation.

"During the budget implementation, we provided this money so that URA increases tax compliance of manufacturers, importers, distributors, and agents or traders to boost revenue collection by the Government," Bahati said before MPs bombarded him with questions.

Lugoloobi described the payment as a "slap in the face."

"Parliament, while scrutinising the national budget for the financial year 2019/20 never passed it. Unfortunately, it is the first item you released money for. This is a slap in the face of Parliament," Lugoloobi said.

The minister was appearing before the committee to present a supplementary request schedule 1 and 2 for the financial year 2020/21 totalling to sh3.4 trillion.