In an effort to increase revenue collection, the Tanzanian Government has in recent years emphasised the use of technology to strengthen tax administration and compliance. Recently, part of those efforts has involved the introduction of the Electronic Tax Stamps Regulations, 2018 (the Regulations). These require the use and application of Electronic Tax Stamps (ETS) on excisable goods.
The Regulations define an ETS as an adhesive label that uses advanced digital coding technology and is printed or affixed directly on the product packaging of excisable goods.
The purpose of the ETS is to help stamp out counterfeiting and tax irregularities such as under declaration of taxes. The ETS does this by facilitating the tracking, monitoring and authentication of stamps and excisable goods along the supply chain, so that all excisable goods can be properly accounted for and taxed accordingly.
The ETS replaces the former paper stamp system, which was cumbersome and prone to human error, allowing certain tax-related malpractices to slip through the cracks.
Implementation of the ETS
The ETS system is being implemented in phases and applied on selected excisable goods. The first phase commenced on 15 January 2019 and affected cigarettes, wines, spirits, beer and all other alcoholic beverages. The second phase began on 1 August 2019 and applied to products such as sweetened or flavoured water and other non-alcoholic beverages, with the exception of fruit or vegetable juice (under the heading 20.09).
The Regulations require each manufacturer to install an electronic tax stamp management system. A Swiss-based firm SICPA has been contracted by the Tanzania Revenue Authority (TRA) to install and enrol all manufacturers, producers and importers onto the system.
The system enables the ordering of stamps, application of stamps on excisable goods, storing of information, authentication of products and production monitoring, among other things.
Manufacturers are obliged under the Regulations to install the system on all production lines of production facilities, while importers must do so in custom-controlled areas. Each packaging and labelling machine must have a corresponding stamp.
An interesting component of the Regulations in terms of Intellectual property is the requirement imposed on manufacturers and importers to declare to the TRA packages and labels of new products manufactured, produced or imported (including those for export and duty free). Further, manufacturers and importers must, at least 30 days in advance, declare the commencement of production of new products or any change in the graphic design of existing ones, together with the corresponding packages and labels.
Core to the Regulations is the duty imposed on various persons involved in the supply chain, such as manufacturers, producers, importers, distributors and retailers, to verify and authenticate the stamps or excisable goods before allowing these onto their premises or handling them in any manner. A mobile application that will enable companies and individuals to verify the authenticity of the tax stamps on products is in the final stages of development.
In light of this, it is evident that authentication is now central to the system, in contrast with previous years where the focal point was only on revenue collection. The spirit of the Regulations is in line with the Minister of Trade and Industry's comments that the war on counterfeit ought to be fought by one and all, including umbrella bodies.
Requirements for registration
The application of ETS requires prior registration. According to the Regulations, registration is compulsory for all persons who engage in manufacturing or importation of excisable goods, for which ETS is applicable. Once registered, the TRA will issue a registration certificate.
For locally manufactured goods, the ETS must be affixed on goods while these are still in the production facility, immediately after packaging. In the case of imported goods, the ETS must be applied at a place which has been approved by the TRA. This must be done within 14 days of the goods receiving customs clearance.
Inevitably, the Regulations impose strict penalties for failure to comply with the requirements. Offences committed under the Regulations can, upon conviction, lead to imprisonment for a term not exceeding three years, or to a fine of not less than TZS 5 million and not more than TZS 50 million, or to both a fine and imprisonment.
The TRA has the authority to seize counterfeit stamps and goods carrying counterfeited stamps, as well as the equipment or plant used in manufacturing the counterfeit stamps or the goods with counterfeited stamps. These will be treated as forfeited. It is expected that this no-nonsense approach will bear fruit by creating a level playing field as counterfeits products which discourage competition would not be readily available in the market.
As the Regulations are still relatively new, it will take time to fully assess their impact in the quest to eliminate counterfeit products from the market. It is, nonetheless, a promising move by the Government, and manufacturers and intellectual property owners should have reason to smile.
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