Manufacturers welcome ETS reduction, push for further cuts

The statement, signed by the TRA Commissioner General, Mr Alphayo Kidata, shows that the decision to reduce the rates came after successful completion of negotiations that involved TRA, the Confederation of Tanzania Industries (CTI) and the ETS vendor, a Swiss firm, Societe Industrielle et Commerciale de Produits Alimentaires (Sicpa).

In the revised rates, manufacturers will pay less by between 14.5 and 30 percent, depending on the sector.

As such, much as they (manufacturers) say the reduction was a step in the right direction, their views differ depending on the percentage decrease in costs that a particular sector gets in the revised rates, which became effective on January 24, 2024.

While those manufacturing and selling cigarettes will have their ETS costs slashed by 30 percent, their counterparts in soft drinks and beer will get a reduction of 14.5 and 19 percent, respectively.

Some of the largest manufacturers who spoke to The Citizen on the matter on Tuesday included the managing director for TBL and South East President of AB-InBev, Mr Jose Moran, Mr Jayesh Shah of Nyanza Bottlers, TCC Plc general manager and CEO, Mr Takashi Araki, the managing director for Coca-Cola Kwanza, Mr Unguu Sulay and the director of corporate relations at Serengeti Breweries Limited (SBL), Mr John Wanyancha.

They all concurred on one thing: that the decision was an indication that the government was working on their grievances, but they hastened to note that the differences in the reduced amount portray the need for further deliberations on the matter.

They said they were asking the government for a 75 percent reduction on ETS charges and wondered why the rates had to go down differently depending on sectors.

“We went to the negotiations armed with independent research by PwC on the effects of ETS charges on our operations. While the announced reduction is a step in the right direction, we remain concerned with the differences exhibited in the new rates,” said Mr Sulay.

He said the announced rates set the stage for manufacturers in the high-margin sector to make more in profits while their counterparts in the low-margin sectors make lower and lower profits or losses.

High-margin products are those that give a high level of profit compared to the amount of money spent on producing them, while low-margin products are the opposite.

And Mr Moran and Mr Shah shared similar sentiments. “We are grateful for the initiative of the government towards this step towards the reduction of tax stamps. Our request has been a reduction of 75 percent, and this is based on factual data that we submitted to TRA. To get only 14.5 percent for soft drinks and 19 percent for beer while cigarettes get 30 percent is very inconsistent,” he said.

He exuded confidence that rates could be reviewed further and that all parties should receive equal reductions.

In his remarks, Mr Araki thanked President Samia Suluhu Hassan’s administration for what he termed ‘continuous efforts to improve the business environment of Tanzania’.

“We very much appreciate TRA’s efforts in reducing the ETS prices for cigarettes. We will continue to engage with the government to ensure we continue to strive for more cost and technical efficiencies of the electronic tax stamps,” he said.

Mr Wanyancha expressed gratitude towards the government for addressing a longstanding grievance by manufacturers, noting, however, that the reduction in the EST charges was still minimal.

“We thanked the government for listening to our request. However, the percentage is still minimal, and the cost of production for manufacturers will remain high,” he said.

Like some of his colleagues, Mr Wanyancha said that while they had requested a 75 percent reduction in EST, the 19 percent was still too low. “This marks the beginning of ongoing discussions, but we remain hopeful that further dialogue will lead to a consensus on the matter,” he said.

Gracing the President’s Manufacturer of the Year Awards (PMAYA) in December last year (2023), President Hassan promised that her administration would address three bottlenecks manufacturers in Tanzania face, including long-standing complaints about ETS, intermittent power cuts and the shortage of US dollars.

“We are currently in talks with the ETS supplier and there are signs that the firm will agree to lower the relevant costs and provide relief to those who use these stamps on their products,” she said in December 2023.

Members of the CTI have for a number of years been complaining that the cost of ETS supplied by Sicpa was too high, with CTI chairman Paul Makanza telling President Hassan on that day that the costs were compelling manufacturers to increase the prices of their products, making them uncompetitive.

That was the first time the Head of State had publicly spoken about the government’s readiness to address manufacturers’ concerns since ETS was introduced in 2019.