Success of Digital Tax Stamps in Uganda: Boosting Revenue and Compliance

Success of Digital Tax Stamps in Uganda Boosting Revenue and Compliance
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Digital tax stamps are a tracking and tracing system similar to traditional banderole stamps. They help prevent tax evasion by providing information such as the brand, manufacturer’s name, production site, and the stamp’s timeline, making it possible to trace a product comprehensively.

In 2019, the Uganda Revenue Authority (URA) introduced the Digital Tax Stamp System (DTS), which faced skepticism. Many were concerned about increased business costs without significant revenue benefits. However, recent years have demonstrated its effectiveness.

Since the fiscal year 2018/19, revenue collection from DTS products has consistently increased, with the exception of fiscal year 2019/20, when the COVID-19 pandemic disrupted economic activities. In fiscal year 2022/23, revenue collection saw remarkable growth, with an additional 157.9 billion shillings collected, marking a 24.2% increase compared to the previous year.

This growth highlights the role of DTS in tax administration and its contribution to domestic revenue mobilization. The number of registered taxpayers for Local Excise Duty (LED) has more than tripled, and Value Added Tax (VAT) revenue has increased by 45.8%, equivalent to an additional UGX 236.2 billion since the introduction of DTS.

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The adoption of the system has steadily risen, with a 21% increase in manufacturers and a 23.3% increase in importers joining the system over the past two years. Notably, Uganda has witnessed a 39% surge in overall tax revenue since the system’s launch, dispelling earlier concerns.

Digital tax stamps have been recognized by the World Health Organization as an effective tool to combat tax evasion. They enable the detailed tracing of products, capturing essential details such as brand, manufacturer, production location, and the stamp’s chronological specifics.

Currently, 1,171 companies are utilizing the URA’s digital tax stamp solution, demonstrating the successful integration of technology and fiscal policy.

The implementation of Digital Tax Stamps is a precursor to the URA’s upcoming 5-year digital transformation blueprint, aligned with the National Development Plan and Vision 2040. This strategy aims to refine tax administration processes and boost revenue collection, underscoring its importance in the nation’s development plan.

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