Concerns still linger over electronic tax stamp rates

Dar es Salaam. Manufacturers received the new government Electronic Tax Stamps (ETS) fees with little alacrity yesterday, saying the announced reduction was too small to make any meaningful impact.

Last week, the government reduced the fees for ETS as it bowed to pressure from manufacturers and some Members of Parliament (MPs) who have been questioning the rates, terming them exorbitant.

The new rates, announced by Tanzania Revenue Authority (TRA) will be lower by between 0.5 and 11.26 percent compared to the previous ones, according to calculations by The Citizen.

But manufacturers say the new rates were just a drop in the bucket.

Tanzania Confederation of Tanzania Industries (CTI) executive director, Leodegar Tenga, said the charges were increasing operational costs to businesses.

The charges also had a negative impact on the sector’s development and the economy at large.

“This failure to address high costs of ETS may lead to reduction in government tax revenue collection due to a decline in sales volume. It may also fuel illicit trade,” noted Mr Tenga.

Manufacturers say they had proposed a cut of 75 percent from past rates, noting that it was unfortunate that the government decided to bring it down to rates that translate into an average reduction of only four percent across all products.

Mr Tenga said the proposal for a 75 percent reduction was due to a rise in the number of manufacturers registered with the ETS.

The number of manufacturers registered with ETS increased from 57 when the system was being adopted in 2019 to the current 272.

According to Mr Tenga, manufacturers had once submitted alternative ETS solution providers to TRA which could significantly reduce the current costs.

Coca Cola Kwanza Ltd managing director Unguu Sulay said a study, conducted by manufacturers, showed that alternative ETS system providers could reduce current costs by up to 50 percent.

He said it was astounding that, despite the rise in the number of manufacturers registered with ETS, the system’s operational costs remained constant.

The general manager and CEO of the Tanzania Cigarette Company, Mr Michal Bachan, said high costs of ETS were adding to operational costs and making local manufacturers uncompetitive.

The costs, he said, were transferred to final consumers.

“We are not against the ETS system. We support it because it has levelled the playing field and increased tax collection. Our concern is the high price.

The government needs to sit with manufacturers to discuss how best to go about the ETS system,” he said.

Tanzania Breweries Limited (TBL) CEO, Jose Moran, said the cost of ETS should be reviewed downwards to alleviate the impact on businesses.

“Given the fact that the contract with the current service provider is about to come to an end, it is high time we sought a new service provider who could offer the service at a lower price,” noted Mr Moran.

Manufacturers said the re-tendering process should be transparent and involve all reputable vendors or service providers based on global best practices.

Speaking about the new rates earlier this week, the TRA’s director for taxpayer services and education, Mr Richard Kayombo, said the decision to reduce the fees rates was meant to provide relief to manufacturers’ costs of production and consequently affordability to consumers.

The decision, he said, was also deemed fit due to economies scale, occasioned by the rise in the number of manufacturers registered with ETS from 57 when the system was adopted to the current 272.

He said unlike during the previous time when ETS payments were in the United States Dollar, the revised rates will be paid in Tanzania Shillings.

“Previously, we were also collecting these fees using dollar currency but from now on manufacturers will be able to pay using local currency which will be more convenient for local producers,” said Kayombo.

In regard to the reduced rates, Mr Kayombo said it was obvious that manufacturers would always seek more reduction, noting however that TRA had taken into consideration a number of factors, including operational costs, before issuing the new rates.

“It is our belief that these new fees will bring relief to both the manufacturer or importer and the final consumer,” he said.