Court halts enforcement of digital tax stamps hours after elapse of transition period

The High Court in Kampala has issued an interim order asking tax body Uganda Revenue Authority to halt the enforcement of the digital tax stamps hours after the elapse of a transition period.

Following the elapse of a two-month transition period on January ,31, URA on Friday warned of heavy fines to manufacturers and importers who have not  completed registration and are ready to commence affixation of the digital stamps

However, a few hours later, the High Court deputy registrar, Agnes Nkonge issued an interim order asking URA to stay the implementation of the digital stamps until the main application in regards the same is hear until February 4.

“An interim order of stay doth issue restraining the respondent (URA), its agents officers or any person deriving authority from it from enforcing the February,1, 2020 deadline of the transition period by which all gazette good comprised in water, soda, beer, wine,spirits and tobacco should bear the digital tax stamp under the digital trucking system which is being implemented by the respondent,”Nkonge said on Friday afternoon.

She warned that the interim order shall remain in force until February 4, when the main application shall be heard inter parties.

The development comes after one Sylvester Kamuli went to court through Muwema and Company Advocates challenging the implementation of the digital stamp system.

Since it came into force last year, manufacturers have challenged the digital stamp system in many foras but their efforts have in the past not been fruitful.

The importers and manufacturers say that they may incur costs to install Digital Tracking Solutions on their premises , a move they say is unfair to them.

The Alcohol Association of Uganda, Nile Breweries and 38 other manufacturers had filed an application before the court seeking to have the implementation of the digital tax stamps halted until the main suit in which they challenge the stamps is disposed of but they were dealt a big blow when the civil division of the High Court in Kampala threw out their application.

“For a temporary injunction to be granted, court should have evidence that the applicant would suffer an irreparable injury which damages would not be capable of atoning if the temporary injunction is denied and status quo not maintained. There should be proof that the balance of convenience is in the favour of the application,”Ssekaana said last year.

The move by the Uganda Revenue Authority will see manufacturers of sodas, beers, bottled water, cigarettes, wines and spirits place digital tax stamps on their products.

The stamps, placed on top of the product are applied from an in-house computer whose servers are accessible to both URA and the manufacturers.

URA insists that this  is aimed  at closing a four trillion shillings gap that is lost in under-declarations.

Uganda is the third country after Kenya and Tanzania to implement digital tax stamps.

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