Consumers will have to endure the burden of a rise in product price as manufacturers, currently implementing Digital Tax Stamps, start to announce an increase in prices of goods.
The increase in prices, according to manufacturers that spoke to Daily Monitor for this article, has been informed by a cost burden brought about by digital tax stamps.
Whereas government had been paying the cost of implementing digital tax stamps for close to a year, now it will be incurred by manufacturers.
There has been a lot of resistance since government implemented digital tax stamps on September 9, 2019.
Therefore, because of the price implication, manufacturers have been in negotiations with government.
However, Daily Monitor could not immediately ascertain the progress of the negations.
In an August 31 notice, Nile Breweries, which mainly produces beer products, announced it had reached a difficult decision to increase the price of its products.
The notices written to distributors and trading partners and signed by Mr Thomas Kamphuis, the Nile Breweries country director for Uganda and South Sudan, said: “Following the announcement from the Ministry of Finance that manufacturers of excisable goods must pay for digital tax stamps from 1 July … we regret to announce that we see no other option than to increase our pricing.”
Mr Kamphuis also noted that over the last 12 months, the Uganda Alcohol Industry Association and the Uganda Manufacturers Association had had numerous engagements with various entities of government, but was unfortunately unable to find alternative ways of financing the new and mandatory system.
The price change, he said, will affect the whole supply chain including stockists, product retailers and consumers and will largely “minimise the impact of the digital tax stamp cost increase as much as possible to protect the livelihoods of the tens of thousands farming families and others in the beer value chain.
The prices will increase by between 5 per cent and 8 per cent, the company said.
Mr Onapito Ekomolit, the Nile Breweries corporate affairs director and chairman of Uganda Alcohol Industry Association yesterday told Daily Monitor: “This is what we have been talking about since last year. Painfully and sadly, we had no choice but to increase prices.
Uganda Alcohol Industry Association has been at the forefront of transferring the cost of digital tax stamp to manufacturers, noting it will affect product prices.
The association in May, petitioned the public to sign a petition, which it said would be presented to the President to explain manufacturers concern with the digital tax stamps.
In July, manufacturers said they had at least gathered 500 signatures from other sector players and stakeholders.
Yesterday, Mr Onapito said manufacturers had informed government of their inability to cover the cost of digital tax stamps, especially at a time when Covid-19 had impacted businesses.
“We appeal to consumers to understand our situation,” he said.
Mr Simon Kaheru, the Coca Cola Beverages Africa – Uganda public affairs and communications director, said because of the sensitivity of the matter to consumers they were yet to effect price changes.
“The price of soft drinks has not changed in many years because this market is very sensitive,” he said in a phone interview, noting it will be sad if digital tax stamps increase prices of essential commodities outside of the reach of Ugandans.
“This is the challenge we have been discussing with government,” he said.
Mr David Onyango, the Uganda Breweries corporate relations manager, said whereas they had not yet increased prices, they were assessing the situation.
“We haven’t yet come to a conclusive decision. We are still assessing the situation and weighing different options,” he said.
What URA says
Earlier, Mr Vincent Sseruma, the Uganda Revenue Authority commissioner for corporate affairs, said that whereas the cost of digital tax stamps remains a critical point of contention, the fee charged on the stamp is very minimal.
The charge on a mineral water bottle for instance, he said, is as low as Shs35 or Shs50.
“When those costs were determined, it was done in a way that they don’t cause significant change on consumer price,” Mr Sseruma said, adding that matters related to the complaints arising from producer associations and stakeholders cannot be handled by URA because the law has no provision within which they can be handled.
While digital tax stamps remain controversial, a document prepared by URA in June indicated that at least 84 spirits companies, nine wines and four beer manufacturers and 42 water producers, which had not been paying taxes, had been brought into the taxable fold after years of evasion.
