TRA defends Eletronic Tax Stamps amid industry outcry

Dar es Salaam. The Tanzania Revenues Authority (TRA) says it has registered tremendous achievements through electronic tax stamps (ETS) even as manufacturers maintain that they are paying through the nose for the marks.
According to data provided by TRA director for taxpayer services and education Richard Kayombo, nearly 500 companies had been registered for ETS by the end of August 2022, up from 50 when the service was first rolled out three years ago.
“Total collection of revenue in the three years of implementation of the system has seen revenue from wines, beers, bottled water, soft drinks, cigarettes and spirits grow from Sh1.6 trillion in the preceding three years to Sh2.1 trillion in the three years after the launch of ETS,” he said.
But against this background, manufacturers have maintained that the achievement being touted by TRA came at a huge cost for them because they were the ones paying tens of billions of shillings each year to Sicpa, the Swiss company that supplies ETS.
Manufacturers estimate that they pay over Sh100 billion in ETS costs to Sicpa every year.
Eight of them – TBL, SBL, Coca-Cola Kwanza, Nyanza Bottling, Bonite Bottlers, SBC Tanzania, Bakhresa Group and TCC – are said to have paid a staggering Sh79 billion to Sicpa in ETS costs last year. With about 500 companies, the amount the Swiss firm pockets could be well beyond Sh100 billion annually. The firms say the money could have been part of their profits and the government could still earn a tidy sum in the form of corporate tax.
Representatives from TBL Plc, Serengeti Breweries Limited (SBL), TCC Plc, Coca-Cola Kwanza and SBC Tanzania said earlier this year that their operating costs had risen by 251 percent at industry level as a result of ETS.
The firms argue that much as ETS has indeed helped to raise excise duty collections, most of the increase was largely due to expansion of the tax base that had some manufacturers who used to operate informally being roped into the formal economic system.
“The only increase in excise duty collections on our side as large taxpayers is just about six percent and that is largely because of our own internal initiatives and not necessarily due to ETS,” the manufacturers said in their joint statement, and called for comprehensive analysis of the efficacy and challenges of the stamps.
They proposed several options, which would work in the same manner as Sicpa’s ETS, but with costs going down by more than 70 percent.
TBL Plc managing director Jose Moran told The Citizen yesterday that ETS costs were exorbitant.
“ETS is a big problem for manufacturers. We are working on piloting our own innovation. ETS costs are just exorbitant,” he said.
He said for Tanzanian manufacturers to benefit from the system, the ETS tender process must be competitive.
“The tender should be open to competitors. We want something that will benefit the industry and consumers,” he said.
But TRA says ETS critics do not have any concrete proof that the system was not working.
“During the financial year ending June 2022, excise duty and VAT from the alcohol beverages produced in the country earned the nation Sh767.5 billion,” Mr Kayombo said.
Locally manufactured spirits earned the taxman Sh239.3 billion. Beer was the greatest earner as it fetched Sh517.9 billion and wines brought in Sh10.1 billion.
“Not only has it improved collections, there is also the element of illicit brews that were making it to the market from some neighbouring countries,” Mr Kayombo added. He said ETS comes with modern technology which provides security features that simplify the administration of taxpayers and addresses long-standing challenges in the administration of tax in excisable goods.
“Besides, it helps to protect the welfare and health of consumers by enabling them to verify the genuineness of the product and stamps using various ways, including mobile phones.”
Mr Kayombo said the process procuring a new vendor was ongoing and several companies had tendered their bids.
“The process is transparent involving CTI, the umbrella body that represents manufacturers, and through this we expect to obtain even more competitive prices for ETS, taking into account economies of scale,” he said.
Speaking during a recent tour of some manufacturing facilities in Dar es Salaam, Finance and Planning deputy permanent secretary Lawrence Mafuru said the government would look into ETS costs afresh following complaints from manufacturers.
“There is enough reason for the government to pay a listening ear to this complaint. There is no way that manufacturers could be seeing something that we in government cannot,” he said during his visits in which he was accompanied by senior officials from the ministry.
Mr Mafuru said he was able to see how the ETS system works during his tour.