Tanzania: Digital Tax Stamps for Cement and Sugar Crucial for 2 Trl/ – Tax Target

HAVING successfully registered increased revenue collections from an average of 800bn/-to 1.3trl/- per month during the past five years, the government of Tanzania is now eyeing to boost the amount to 2trl/- by October, this year.

President Samia Suluhu Hassan and Vice-President Dr Philip Mpango have thus tasked the Tanzania Revenue Authority (TRA) to improve and widen the tax base to achieve the target for undertaking recurrent and development expenditures.

The two leaders issued the directives shortly after swearing in ministers, deputy ministers and Chief Secretary, Ambassador Hussein Kattanga, on April 1, this year, at the Chamwino State House in the capital city of Dodoma. It is a known fact worldwide that countries depend on taxes to provide social services and execute development projects for their people.

As the government gears for tabling of budget estimates for fiscal year 2021/2022 in June this year, hopes are high that the Minister for Finance and Planning in Tanzania, Dr Mwigulu Nchemba, will highlight measures that would guarantee increased tax collections.

During the past five years under the then President John Magufuli, who breathed his last on March 17, this year, the government was able to boost taxes through various measures, including use of electronic solutions for collection of revenues. These measures include Electronic Fiscal Device Management System (EFDMS), Government e-Payment Gateway System (GePGs) and Tanzania Customs Integrated System (TANCIS), among others.

On its part, TRA introduced various digital initiatives, most notably the Electronic Tax Stamps (ETS) management system of which the first phase was introduced on January 15, 2019. The digital stamps are meant to replace the hitherto paper stamps which were prone to cheating of taxes through under declaration at production at factories and imports, among other malpractices.

Application of ETS enables TRA to track on real-time actual production at factories and imports and eventually facilitates collection of requisite taxes and curb fake products in the local market. The digital stamps as well enable the government to detect smuggled goods, and as such protect local manufacturers against unfair competition and shield the citizens from consuming substandard products.

The first phase of ETS was introduced in January 2019 through a Swiss company Société Industrielle et Commerciale de Produits Alimentaires (SICPA) which provides software and hardware for the technology. During the initial phase, the electronic stamps were affixed on products which are subjected to excise duty, such as cigarettes, beers, spirits and wines.

The digital stamps were later rolled out for carbonated soft drinks, bottled water, fruit and vegetable juice in addition to recorded film and music products in the second phase. Based on the accomplishments of the two phases, the Parliamentary Standing Committee on Budget last year proposed extension of the technology for edible oil, sugar and farm inputs.

The committee further recommended the digital stamps to be affixed on human and veterinary medicine as well as cosmetics to check cheating of taxes and counterfeit products and eventually boost revenues. The then Chairman of the committee, who is now the Minister for Livestock and Fisheries, Mr Mashimba Ndaki, pointed to the fact that application of ETS had enabled TRA to track actual production at factories and imports.

“My committee hence proposes the same system for other products to protect consumers from harmful products and also boost government revenues,” Mr Ndaki had suggested. He was equally optimistic that the ETS management system will play a crucial role in detecting smuggled products to protect local manufacturers against unfair competition.

“Our country faces a challenge of substandard and smuggled products which do not only deny the government of taxes, but poses health risks to consumers, farmers and also creating unfair playing grounds for local producers. “It is high time the government through TRA extended the application of the technology to widen the tax base and eventually boost revenue collections to the treasury coffers,” the parliamentary committee recommended.

Data by TRA have shown that since the first phase for ETS management system was introduced for excisable products in January, 2019, there has been considerable increase in collection of excise duty and Value Added Tax (VAT) compared to the same period in the previous years.

Among members of the East African Community (EAC), the government of Uganda through the Uganda Revenue Authority (URA) became the first country to introduce digital stamps for cement and sugar effective April 1, this year.

The technology, dubbed Digital Tax Stamps (DTS) in Uganda, is a mark or label applied to goods and their packaging and contains security features and codes to prevent counterfeiting of goods through its trace and track capabilities. Having affixed the stamps for tobacco products, bottled water, soda, beers in addition to wines and spirits, the URA decided to extend the technology for locally produced as well as imported sugar and cement.

Given the significant achievements registered by TRA through the digital stamps, it is no doubt that extension of the technology to other products such as cement and sugar will play a crucial role in expanding the tax base to achieve the target of collecting 2trl/- per month as envisaged by President Samia Suluhu Hassan.

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