HOW GOVERNMENT IS LOSING BILLIONS ON ALCOHOLIC SPIRIT BUSINESS

By Deogratias Kishombo

Dar es Salaam

DESPITE the government efforts to ensure that traders and manufacturers play “a fair game” in doing business in order to catalyze the national development by paying proper taxes, some alcoholic spirits manufacturers are staging unfair competition, as their doing business model creates doubts.

A recent survey by Times Observer has found that TRA is not doing enough to intercept the unscrupulous and dishonesty traders in the alcoholic spirits sector who cheat the government on taxes or on how they do business starting from production processes in their factories.

Currently, some of liquor manufacturers are not implementing the government strategy plan of using electronic stamps which aims at efficient revenue collection from the sector.

The deadline for manufacturers to start using e-stamps was postponed twice in 2018 and the last deadline was set for December 30, 2018 but still there are some manufacturers who have failed to meet it.

President Dr John Magufuli has always insisted of fair play game for business community to honestly pay taxes on time because the collected revenues go for the national projects such as infrastructure development, buying medicine, free education, national security and other development issues.

Before the new government’s strategy to shift to e-stamps use, some manufacturers had cunningly been bringing products in the market by using fake paper stamps in order to evade paying taxes, thus staging unfair competition for other products and brands that hold the genuine stamps.

However, the  introduction of e- stamps has been received by some of honest alcoholic liquor manufacturers as “a good move in the right direction” saying  it will help the government to collect more revenues from the sector and curb the influx of fake stamps and illegal production of liquor.

How the government is cheated?

The survey conducted by this newspaper in Dar es Salaam shows that products’ prices of some famous alcohol producers, contradict the requirements of the actual production of spirits in the country.

For example the Government through the Tanzania Revenue Authority (TRA) and the Ministry of Finance have provided a price range that requires a 200ml bottle sold at a price not less than Tshs. 2,000/ = at a retail price, but there are some shops the newspaper has found the same bottle being sold below that price.

"The problem here is probably not tax evasion, but rather health issues should be considered. It is possible that those goods sold below the actual price might not adhere with the health standards," says a TRA officer who pleaded anonymity.

According to Finance Act, there are two types of alcoholic taxation for local manufacturers which are, Excise Duty and Value Added Tax 18%.

The survey has showed that the excise duty on alcohol has been increasing for the past ten years especially for spirits.

The excise duty rate, the government charges 3,655.05 per little whereas the manufacturers has to incur other expenses from taxes such as costs for production, shipping for raw materials, machinery, salaries, marketing costs and distribution costs.

In some shops, the survey found that one carton with 30 plastic bottles of capacity of 200ml was sold between TShs. 48,000 and TShs. 66,000, and it needs a little arithmetic to realize that it would be difficult to sale one carton below TShs. 60,000 after paying all taxes and other expenses.

"In any trade there must be equal ground for making business in order to protect the producer but there is a big difference for some alcohol traders on how they run their businesses. It is impossible to sale below TShs. 60,000 and make profit, they must be cheating somewhere.

"We have to ask a person who sales at 48,000, how does he/her make profit? I think we must do research on these alcoholic beverages because there must be some dirty game,” he said.

The Tanzania Trade and Agriculture Association (TCCIA), through Dodoma Region chairman, Deus Nyabiri, said the government should take immediate steps to deal with the situation.

"It is not fair for illegal traders to continue ruling in the marketplace. This leads to unprecedented competition against legitimate traders who have been supporting the government on industrial investments,” he said.

He added that investors should understand the government's desire to make the country more industrialized, so it is important to support it rather than counteract.

Recently at the National Council of Commerce (TNBC) meeting, President Magufuli stressed the importance of manufacturing while demanding investors to pay taxable taxes to the government.

Earlier last year, alcoholic manufacturers, including other stakeholders, asked the government to take action against non-standard products to protect legitimate market products especially spirits, and to safeguard consumers.

During the Parliamentary sessions last year, some parliamentarians demanded the government to add efforts to combat illegal alcoholic beverages because they were cheaply sold and endangered consumers' health.

Speaking while contributing to Parliament, Industry, Trade and Environment standing committee, MPs said some alcoholic industries do not pay taxes.

"Why it takes too long to deal with this affair with the fact that the government has no income," said Livingstone Lusinde, an MP for Mtera constituency.

 Chairman of the committee, Suleiman Saddiq, urged the government to take serious action against fake-producing alcoholic factories because they have been cheating TRA on taxes.

Credit Source: Times Observer