FTA campaign on to monitor ‘Digital Tax Stamps’ compliance

Business Bureau, Gulf Today

The Federal Tax Authority (FTA) has conducted two simultaneous awareness and inspection campaigns to verify compliance with the ‘Marking Tobacco and Tobacco Products Scheme’ in the first month since the ban on selling cigarettes not bearing the Digital Tax Stamps in local markets went into effect.

The Stamps placed on cigarettes allow for tracking the products from the manufacturing facility and until they reach the end consumer. The objective is to protect consumers from low-quality products, combat tax evasion, and ensure all Excise Taxes due on tobacco products have been paid, in keeping with Cabinet Decision No. (42) for 2018 on Marking Tobacco and Tobacco Products, and FTA Decision No. (3) of 2018 on the same subject.

In a press statement issued on Saturday, the Authority explained that several violations were detected in August 2019 in a campaign that included 20 inspection trips conducted in collaboration with Departments of Economic Development in all seven emirates and covering 530 retail outlets. Furthermore, the FTA asserted that all necessary procedures were taken to ensure that violators comply with regulations in the future.

The Federal Tax Authority noted that as of May 1, 2019, a ban was enforced on importing cigarettes into the UAE if they did not carry the Digital Tax Stamps. Then on August 1, the sale and possession of unmarked cigarette packets was prohibited in local markets, in keeping with the implementation timeline that began on January 1, 2019. The Authority explained that two types of Digital Tax Stamps were approved, the first of which is red and designated to be placed on cigarette packs authorised for distribution in UAE markets and at duty-free for arriving travellers, while the second is green and designed for sales of cigarette packs at duty-free in departure lounges.

FTA Director General Khalid Ali Al Bustani said that the new campaign seeks to establish direct communication with dealers and consumers in local markets, and raise their awareness about the importance of full compliance with the ‘Marking Tobacco and Tobacco Products Scheme’.

He reiterated the Authority’s commitment to enhancing collaboration and coordination with local and federal government entities to ensure compliance with tax regulations, as well as the stability and regularity of local markets.

“The Federal Tax Authority seeks, first and foremost, to raise awareness among Taxable Persons and consumers about their tax rights and obligations,” Al Bustani added. “We are intensifying our efforts to support businesses and help them comply with tax systems and procedures. They are our strategic partners, and our objective is to enable them to successfully manoeuvre the tax system and self-comply with tax regulations.”  “The campaign is part of the FTA’s efforts to tighten control on local markets, protect consumers and combat tax evasion,” he explained.

“Teams of experts from the Authority and Departments of Economic Development in all seven emirates are conducting daily inspection trips to raise awareness of the tax system in general, and the ‘Marking Tobacco and Tobacco Products Scheme’, in particular, as well as to outline the administrative penalties that would be imposed in the event of non-compliance.”

“The joint expert teams undertake awareness campaigns in shopping malls and retail outlets, urging consumers to check for the Digital Tax Stamps on the cigarettes they purchase, which help verify that they are not counterfeit or low-quality products, and indicate that the dealer has complied with Excise Tax regulations, thus avoiding any administrative penalties,” the FTA Director General concluded.

As per the Cabinet Decision on violations of procedures to mark Designated Excise Goods, penalties shall be imposed if the Digital Tax Stamps were not fixed on the packaging of tobacco products before supplying them in local markets. The Decision specifies a penalty of Dhs50,000 plus 50% of the amount of Excise Tax due, to be collected from any Person possessing or supplying unmarked Designated Excise Goods in the UAE.

Meanwhile, any Person that knowingly allows their facilities in the UAE to be used for the sale of unmarked Designated Excise Goods incurs a penalty of Dhs25,000 for a first violation and Dhs50,000 in case of repeated breaches.

In the event where a Person alters or prints over Digital Tax Stamps placed on Designated Excise Goods, a penalty of Dhs50,000 plus 50% of the amount of Excise Tax due is levied. Meanwhile, if a Person fails to report a transfer of Designated Excise Goods, a penalty of Dhs20,000 is collected for every time the violation was committed. Furthermore, non-compliance with the FTA’s requirements for stockpiling Digital Tax Stamps results in a Dhs50,000 penalty for every instance.

The Federal Tax Authority was established by Federal Decree-Law No. (13) of 2016 to help diversify the national economy and increase non-oil revenues in the UAE through the management and collection of federal taxes based on international best practices and standards, as well as to provide all means of support to enable taxpayers to comply with the tax laws and procedures. Since its inception in 2017, the FTA has been committed to cooperate with the competent authorities to establish a comprehensive and balanced system to make the UAE one of the first countries in the world to implement a fully electronic tax system that encourages voluntary compliance, with simple procedures based on the highest standards of transparency and accuracy — beginning from registration, to the submission of tax returns.