In Kenya, the disagreement went as far as the courts, with an order for its enforcement to be suspended, but the controversial excise tax stamp policy is to take effect in Ghana from March 1, 2018, even as the beverage industry contends that the format is inefficient and costly.
Whilst government insists on rolling out the policy beginning March 1, to check tax evasion, the manufacturers argue that whilst they are not against the policy in principle, affixing paper stamps to bottles on high speed production lines would slow down the production process by at least 10% and would lead to avoidable losses.
Each tax stamp roll contains 10,000 stamps, and the manufacturers content that this would technically mean a roll change approximately every 15 minutes on production lines that run between 36,000 and 48,000 bottles per hour, thus causing further production inefficiencies and loss of production time.
Government, they argue, should suspend the rollout, and be amenable to the alternative they are proposing, which is that instead of paper stamps, the stamps could be in a digital form and could be coded on bottles just as expiry dates are printed on them.
Not only would this prevent loss in production time, it would also be a much less expensive alternative to the paper stamps, the cost of which would most definitely be pushed onto the consumer, industry people argue.
“I mean; let’s say, for example, that you are putting a paper stamp which costs half a cedi onto a bottle of water which costs a cedi; what sense would that make?” one industry player said.
The B&FT has been digging into the matter, and has found that almost all beverage producers and importers are strongly opposed to the tax stamps in their paper form.
The CEO of locally owned Kasapreko Company Limited, Richard Adjei, told the B&FT in a recent interview that government would have to reconsider the policy.
“I agree with the tax stamps, because it is important to check revenues and fake products in the system. But, our problem is the format we are being forced to implement; it is not the best. We are not against the tax stamps; we just want a system that is cheaper and efficient,” he told the B&FT in a recent interview.
“From our side, it is going to slow our machines down by about 10percent. So, if we are making less money, we also pay fewer taxes. So, it looks like a reverse of whatever government is trying to achieve,” he said.
Government’s insistence on rolling out the policy, for which a law was passed back in 2013, appears to lie in the fact that the paper stamps have already been procured, and the American company behind the supply of the stamps and the machines to be used for affixing them –Authentix Inc. – is eager to see results.
It is even rumoured that some “diplomatic pressure” is being applied on the government of Ghana in order to get the system going.
At its launch in August 2017, both the Finance Minister, Ken Ofori Atta, and the US Ambassador to Ghana, Robert P. Jackson, hailed the excise tax stamps as being significant.
If the policy takes effect on March 1, it would mean that, aside cigarettes and other tobacco products, all alcoholic or non-alcoholic beverages and water, “whether bottled, canned, contained in kegs for sale or packaged in any other form,” would have to have the paper tax stamps affixed to them.
Controversy over how to affix stamps
Section 8 (2) of the Excise Tax Stamp Act 873 of 2013 states that the stamps “shall be affixed on a product unit in a manner that ensures that the stamp will be broken or will be rendered unusable when the product unit is opened.”
To do this, the Tax Stamp Implementation Committee has indicated that the stamp on the beverages be affixed to the top of the bottles or across the crown cork. The idea is to ensure that one stamp is not used more than once.
Industry people argue, however, that affixing the stamps in the manner the law prescribes is impracticable since the bottles may be wet at the time of labelling due to condensation, making it difficult for the stamps to stick on them.
Authentix Inc. has carried out trials, but there is a disagreement between the manufacturers on the one hand and the government and Authentix on the other, as to whether the trials worked. Whilst Authentix insisted that they worked, the companies argue that the trials were a complete failure.
Upon further consultations, the parties agreed to carry out further trials between January and February 2018. Here, again, there is a stalemate in that government has asked that any company interested in partaking of the trials should cough up US$10,000 to cover costs, since Authentix has said it would not absorb the cost the second time.
Whilst the March 1 commencement date draws nigh, none of the beverage manufacturers, including Coca Cola, Guinness Ghana, Kasapreko, Voltic (GH) Limited and Accra Breweries, has paid the said amount for the trials, leaving doubts as to whether the rollout of the policy will happen as planned.
The Government of Ghana, in December 2012, entered into an agreement with Authentix Inc. of the USA for the supply of tax stamps, tax stamp applicator and consultancy services for tracking of excisable goods sold in Ghana.
Following that, parliament, in 2013, ratified the agreement with Authentix and an Excise Tax Stamp Bill was introduced and passed as Excise Tax Stamp Act 2013 (Act 873). After receiving Presidential assent in January 2014, the law came into force.
But the implementation could not take effect immediately because the two sides are yet to reach a consensus on what would work for all parties involved.
“We have done meetings upon meetings on the tax stamp issue but it’s a contract they [government] have signed and I think because government has bought the equipment and the stamps, if these are not implemented government could be looking at paying judgment debt,” Richard Adjei of Kasapreko told the B&FT.
“What we are proposing is that we can put an electronic version of the tax stamps as a code on the products and revenue officers can check them on the retail market anytime and anywhere.
And this means we would not have to buy the tax stamp machines, which cost at least US$2.5million for me, that the government has already acquired and that could save us a lot of cost,” he added.
Who bears the costs?
Section 6 (3) of Act 873 states that: “The manufacturer or importer that requires the stamp shall be responsible for the cost of the Excise Tax Stamp but the cost may be subsidised as the Minister may determine.”
Government has decided it would bear the cost of the stamps in the first half of the year, and bear half the cost between June and the close of the year 2018, after which it would review its position on same.
But the companies would have to bear the cost of the machine that would be used to affix the stamps, the unit cost of which is said to be in excess of US$300,000.
This means that a company that runs six production lines, for example, would require US$1.8million to purchase the machines.
Again, the companies would have to sign a maintenance service agreement with the equipment supplier – Authentix, something they say is going to be additional cost to their operations.
In adverts it has been running in line with enforcement of the policy, the Ghana Revenue Authority (GRA) has been explaining the processes involved.
There are currently three (3) different designs of the stamp for alcoholic beverages, water and carbonated soft drinks; Spirits and Wine; and Tobacco.
Additionally, the stamps for domestic products are coloured orange whilst the stamps for imported products are coloured purple.
Excisable goods imported into Ghana could have the stamps affixed to them by the authorised foreign manufacturer or the importer before export to Ghana.
The stamps could also be affixed to the product at the point of entry in a specified facility operated by GRA, which importers say is limited for the amount of goods imported.
It could also be done in a place or premises approved by GRA i.e. a bonded warehouse or any premises considered appropriate for the security of the goods and revenue.
For local manufacturers, the stamps are to be affixed on each product unit of all excisable goods before the product unit is delivered out of the factory.