Swiss Firm SCPA 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.
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