Manufacturers request Government to lower rates of Electronic Tax Stamps

Manufacturers request Government to lower rates of Electronic Tax Stamps (ETS)

Dar es Salaam, January 20th, 2022: 

Manufactures of excisable goods in the country have requested the Ministry of Finance and Planning and Tanzania Revenue Authority (TRA) to lower the rates of Electronic Tax Stamps (ETS) announced on Monday this week arguing that the rates are too high.

Speaking on behalf of the excisable goods industry at a press conference held today in Dar es Salaam, the Executive Director of the Confederation of Tanzania Industries (CTI), Mr Leodegar Tenga, reiterated the private sector’s support for use of the ETS but called for affordable charges agreeable by both the Government and the manufacturers.

“Manufacturers have categorically reiterated the fact that they support the government’s initiative to implement Electronic Tax Stamps since it fosters a fair and competitive business environment that stimulates economic growth. CTI and its members support the use of ETS on the grounds that it ensures transparency in business operations and combats under-declaration and proliferation of illicit goods in the market,” the CTI Executive Director said. He further argued that the charges are not only an increased operational cost to the businesses but also have a negative impact to the sector’s development and the economy in general. He also said the sector had, in earlier engagements with TRA, submitted alternative ETS solutions which could significantly reduce the current costs. However, the request has not been considered in the rates released by TRA this week.

The CTI Executive Director went on to state the following recommendations that CTI, on behalf of industry presented to the Government for consideration in reviewing the ETS system.

The specific requests / recommendations by industries were that:

1.    The cost of ETS should be reviewed downwards to alleviate the impact on industries that are already tasked with the requirement to pay VAT & excise duty over and above the other taxes and fees associated with the respective industrial sub-sectors. Industries had requested a reduction of 75% on the prevailing ETS rates. The reduction is justified by the reports by TRA which shows increase in economies of scale due to the rise in the number of manufacturers registered with ETS from 57 when the system was adopted to the current 272, and findings of the study by the Independent Consultant indicating that alternative providers are on average about 50% cheaper than the current  rate.

2.    Manufacturers represented by CTI should be involved in the review process as ke ystakeholders. 

3.    The retendering process should be transparent and involve all reputable vendors/service providers based on global best practices.

4.    Concrete plans should be put in place to localize the operations of ETS, soonest possible, in order to do away with externalization of funds. This is based on the understanding that ETS charges are paid to the external third-party vendor and do not go to the Government coffers.

5.    The payment of ETS should be in Tanzania Shillings and not US Dollars.

6.    Explore alternative ETS options that address the Government’s industry-specific objectives while minimizing the burden on industries, Government and the economy as a whole. The identification of industry-specific objectives is essential in order to assess whether the costs of the proposed solution outweigh the anticipated benefits.

“We appreciate the fact that ETS shall be paid in Tanzania Shillings, but we are not encouraged by the fact that there has been an insignificant change in the rates. In fact, based on the positive engagements we had with TRA, and other government entities supported by the study conducted by an Independent Consultant, left us with an anticipation of a significant reduction in ETS costs. While manufacturers requested a decrease of 75%, the reduction offered by the new rates amounted to only 4% on average across all the products,” the Executive Director said. (A comparison of the old and new ETS rates is herein attached) 

The CTI Executive Director cautioned that failure to address the high costs of ETS may lead to negative consequences including reduction in government tax revenue collection due to declined sales volume, acting as a barrier to entry for new local products, and fuelling illicit trade.

Finally, the CTI Executive Director urged the authorities to address the industry concerns to align with the aspirations of the 6th Phase Government aimed at fostering investment and improving the business environment. 

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