The Uganda Revenue Authority’s (URA) Commissioner General (CG) John Musinguzi Rujoki has committed to reviewing the concerns raised by manufacturers about the cost of Digital Tracking Solutions (DTS) and non-compliance within the sector.
The Commissioner General made these remarks during an event this morning at Kampala Serena Hotel where the Private Sector Foundation Uganda and PwC Uganda launched a report on the Study of the Impact of Digital Tax Stamps in the Manufacturing Sector.
According to the report, there has been an increase in operational expenses incurred by manufacturers equivalent to an average of 16% of their Local Excise Duty obligations, hampering the growth and expansion of businesses. Additionally, 56% of the manufacturers registered an increase in the cost of production, and 50% of them reported diminished profitability.
Executive Director of PSFU, Stephen Asiimwe, said that most of the costs incurred are absorbed by the manufacturers and not passed on to the final consumers due to concerns about the impact on consumer demand.
The Commissioner General welcomed the findings of the report and pledged to work with stakeholders in the Ministry of Finance to act on the recommendations to enable business continuity as manufacturing is a crucial sector in the National Development Plan.
“The cost of implementing DTS is designed to be manageable and is outweighed by the benefits of improved tax compliance and the reduction of illicit trade. Our primary challenge is not the system’s expense but ensuring that all businesses comply with these necessary regulations,” he said.
Since its introduction in 2019, DTS has significantly broadened Uganda’s tax base, with a notable increase in registered manufacturers and importers. The system has been pivotal in curbing tax evasion and enhancing supply chain transparency across various sectors. However, resistance to full compliance in certain sectors continues to undermine its potential benefits.
“We have observed a significant improvement in sectors where compliance is high,” noted the Commissioner General.
URA statistics indicate that DTS not only serves as a regulatory tool but also stimulates economic activity by leveling the playing field among businesses.
During the discussion, Zackey Kalega, acting Commissioner of Internal Trade for the Ministry of Trade, highlighted the Government’s efforts to manage illicit trade. “We are trying to operationalize a committee on illicit trade and we are working very closely with some of the companies I see here: BAT, UBL, and others.”
Since the introduction of DTS in 2019, URA has conducted numerous workshops and training sessions to help businesses understand the importance of DTS and integrate it effectively into their operations. Nonetheless, non-compliance remains a significant hurdle.
Agnes Ssali, Legal Director, and Company Secretary for Uganda Breweries Limited emphasized the need for digitization to achieve the full potential of DTS. “We have 65% of illicit trade in the alcohol sector, and it has been exacerbated by DTS misuse, including underdeclaration. Moving towards digitization is the solution.”
As Uganda continues to navigate the complexities of modernizing its tax system, the role of DTS remains crucial. The focus is now on enhancing compliance across sectors, including Kombucha products, ensuring that the benefits of DTS can be fully realized and thereby supporting Uganda’s broader economic goals.