Traders ob­ject to Dar tax deal

The East African - - NEWS - By CHRISTO­PHER KIDANKA The Eastafrican

SWISS FIRM SICPA Ltd is in a tight spot after man­u­fac­tur­ers op­posed a ten­der it was awarded by the Tan­za­nia Rev­enue Au­thor­ity to sup­ply, in­stall and sup­port soft­ware and hard­ware for an elec­tronic tax stamp (ETS) man­age­ment sys­tem.

Man­u­fac­tur­ers say the ten­der was not awarded com­pet­i­tively and that the terms in­ap­pro­pri­ately re­quire them to pay for the in­stal­la­tion of the stamp ma­chines, which is ba­si­cally an in­vest­ment obli­ga­tion of the con­trac­tor.

They are not only op­posed to the in­tro­duc­tion of the sys­tem due to the cost na­ture of the deal, but they are also un­com­fort­able with the con­trac­tor, who is ac­cused of cor­rupt prac­tices in Kenya, Brasil, Al­ba­nia and Morocco.

Mak­ers of beer, soda, juice and ci­garettes want the con­tract nul­li­fied and a meet­ing con­vened in­volv­ing the ven­dor, tax­man and stake­hold­ers.

The Swiss com­pany’s sub­sidiary in Kenya was granted a ten­der of a sim­i­lar na­ture last year, but was ac­cused of se­cur­ing it cour­tesy of fraud­u­lent doc­u­ments.

In Tan­za­nia, man­u­fac­tur­ers say the SICPA sys­tem, which is about to com­mence this year, will ac­tu­ally in­crease pro­duc­tion costs.

Serengeti Brew­eries Ltd man­ag­ing di­rec­tor He­lene Weesie said the move will push the tax rate to $10.1 per 1,000 units, re­sult­ing in an ad­di­tional $100 mil­lion an­nual cost to the in­dus­try.

The ETS means a ven­dor will in­stall ma­chines to mark tax com­pli­ance right from the man­u­fac­tur­ing process.

Ac­cord­ing to the deal, the cost of that in­vest­ment will be borne by the man­u­fac­tur­ers, who will meet the con­trac­tor’s in­vest­ment costs on top of their own costs of do­ing business.

The sys­tem will re­place pa­per-based tax stamps ini­tially at­tached to ci­garettes, wines, and spir­its. The tax­man is propos­ing to re­place the old sys­tem with an elec­tronic one, but this time, ex­tend­ing it to all ex­cis­able prod­ucts in­clud­ing beer and so­das, in or­der to check coun­ter­feit­ing and pro­mote tax com­pli­ance.

Speak­ing at a meet­ing be­tween the gov­ern­ment and the pri­vate sec­tor, Ms Weesie said the cost of run­ning the equip­ment and the im­pact on pro­duc­tion ef­fi­ciency would be an ad­di­tional cost to in­dus­tries that al­ready op­er­ate with tight profit mar­gins.

She said there are other ven­dors who of­fer the same sys­tem at a frac­tion of the cost of SICPA’S and faulted the ar­gu­ment by the Tan­za­nia Rev­enue Au­thor­ity that the in­tro­duc­tion of elec­tronic stamps will help, say­ing com­bat coun­ter­feit­ing does not hold true since beer, wa­ter and soft drinks are not prone to coun­ter­feit­ing.

Pro­po­nents ar­gue that the ad­di­tional cost is likely to in­voke price in­creases passed on to con­sumers, which will limit mar­ket growth for these prod­ucts, which in turn will de­crease tax rev­enue.

The tax­man pro­poses ETS on all ex­cis­able prod­ucts ef­fec­tive this year.

Af­fix­ing tax stamps on prod­ucts is a sim­pler way of de­tect­ing con­tra­band and smug­gled goods.” Tan­za­nia Rev­enue Au­thor­ity on elec­tronic tax stamp sys­tem

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