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The role of ETS in curbing  illicit booze in the local market

The role of ETS in curbing illicit booze in the local market

OVER the past few days local media has been awash with reports of how the government is losing billions of revenues each year through selling and consumption of alcoholic drinks originating from illicit and informal markets in the country.

The media reports stem from revelation by the Managing Director of Tanzania Breweries Limited (TBL), Mr Jose Maran, who asserted that illicit and informal markets constitute 55 per cent of the overall market of alcoholic drinks in Tanzania.

Speaking during a media briefing recently, the MD of the country’s leading brewer, said the figures were availed through research conducted in the year 2019 by Ernst & Young.

The consultant was commissioned to ascertain the extent of the illicit and informal market of such drinks in the local market. TBL is a member of the Anheuser-Busch InBev group of companies with a market share of over 70 per cent in Tanzania. It is one of the largest taxpayers in the country having paid a total of 3.7trl/- over the past ten years, translating to an average of 370bn/- each year.

According to Mr Maran, consumption of alcohol in Tanzania stands at 729,619 hectolitres per annum but the volume of authentic companies which produce alcohol stands at 330,617 hectolitres.

This means that the remaining 339,011 hectolitres are taken by illicit and informal markets. Findings of the research thus show that a good number of boozers prefer locally brewed and smuggled alcoholic drinks which are relatively cheaper, because they are not subjected to taxes as opposed to formal and registered brands.

“The formal alcohol market faces significant competitive pressure from illicit and informal markets due to relative affordability. “Maintaining the relative affordability of licit alcohol presents a significant opportunity for the government to increase tax revenue through widening of the tax base,” Mr Maran explained during the media briefing to editors and senior journalists from local mainstream media houses.

The MD was nevertheless satisfied that the government is taking various measures to address the challenge including introduction of Electronic Tax Stamps (ETS), which enables the Tanzania Revenue Authority (TRA) and consumers to identify genuine products against counterfeits.

For instance, in February this year, authorities in Muleba District in Kagera Region, destroyed consignment of illegal liquor spirits with a value of 28m/- that was apparently smuggled into the country through the porous borders.

Speaking then, the Muleba District Commissioner, Engineer Richard Ruyango, said the consignment of the sachets was impounded during an operation conducted in 2017 and 2018.

“The impounded spirits could not be disposed of immediately due to an injunction filed at the District Magistrate’s Court. However, the Regional Prosecution Office successfully won the case and the spirits were eventually destroyed.

Engineer Ruyango was categorical that similar operations will be conducted to ensure that illegal and dangerous products are not smuggled into the country as they pose serious health risks to consumers and deny revenues to the Treasury Coffers. Last year, the National Chairman of Bishops and Sheikh’s Ethics, Peace and Human Rights Committee, Bishop William Mwamalanga, warned of what he described as a cartel of powerful businesspersons and politicians behind the illicit alcoholic drinks.

“The illicit market is detrimental to the youth and denies the government of requisite taxes,” he said while presenting findings of a report titled; “Illicit liquor industry in Tanzania,” which was carried out between the year 2017 and 2019.

Apart from enabling the government to obtain in realtime production data from manufacturers and importers, electronic tax stamps discourage smuggling of counterfeits into the local market and hence protect local producers against unfair competition.

The government of Tanzania through TRA introduced the first phase of ETS on January 15, 2019, covering alcoholic drinks and tobacco products. The technology was further extended to bottled water, energy and malts drinks in August, 2020.

Having registered significant achievements during the first and second phases, TRA rolled out the third phase of the digital stamps last year for products such as fruit and vegetable juices in addition to recorded music and film products.

Hopes are high that the introduction and subsequent roll out of the electronic tax stamps (ETS) will not only play a crucial role in curbing illicit booze but also other excisable products in the local market which are supposed to be affixed with the digital tax stamps.

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