The Manufacturers Association of Nigeria (MAN) has expressed its concerns regarding the proposed tax stamp system for excisable goods, stating that it lacks substantial benefits for the economy.
The association referred to various African economies and beyond where similar systems were implemented but ultimately failed, including Kenya, Uganda, Ghana, Tanzania, Saudi Arabia, the Gulf States, and the United Kingdom.
In a position statement signed by Segun Ajayi-Kadir, the Director-General, MAN acknowledged the government’s efforts to harmonize and modernize tax administration while promoting greater accountability within Nigeria’s tax system through the Nigeria Tax Act 2025.
“Our members largely welcomed this legislation, as it provides a simplified tax framework, harmonises the tax regime, and offers relief to industries, particularly small and medium-sized enterprises (SMEs),” he said.
However, MAN expressed concern over a potential distraction from this positive development due to the possible introduction of the Tax Stamp System for excisable goods.
Ajayi-Kadir emphasised that while the government sees the tax stamp as a way to curb smuggling and counterfeiting, and to enhance transparency, the global evidence does not support its efficacy.
“The proposition has typically originated from vendors promoting tax stamps as a solution to illicit trade. As a critical stakeholder, we believe that, while the intention is commendable, evidence worldwide shows that tax stamp systems often impose heavy compliance costs, create operational challenges, and yield limited additional revenue.
Examples from Africa
Kenya (2013–present): Implemented the Excisable Goods Management System (EGMS) with physical and digital stamps for alcohol and tobacco, later expanding to bottled water, juices, cosmetics, and other excisable goods in 2019.
Although it raised some revenue, it led to multiple legal disputes, high compliance costs, and public resistance, with many manufacturers arguing that the system nearly priced them out of the market. Illicit trade continued despite this scheme.
Ghana (2018): Rolled out excise tax stamps for alcohol, cigarettes, and bottled water.
Manufacturers reported considerable cost burdens of up to 5–7% of product costs, with limited impact on illicit trade due to persistent smuggling routes.
The GRA acknowledged ongoing issues with goods in transit being redirected back into the domestic market.
The Food & Beverages Association of Ghana (FABAG) urged the Ghana Revenue Authority (GRA) to cover the costs associated with digital tax stamp machines instead of passing them onto manufacturers.
Tanzania (2019): Adopted digital tax stamps for alcohol, tobacco, and soft drinks. Although there was an initial revenue increase, ongoing costs (such as stamp fees and machine installations) and operational delays led to several small companies exiting the market.
Uganda (2019): Introduced tax stamps; a 2024 study by the Private Sector Foundation Uganda (PSFU), in collaboration with PwC and supported by the Uganda Manufacturers Association (UMA), revealed significant challenges, including high compliance costs, operational pressures on small and medium enterprises (SMEs), and reduced competitiveness compared to neighbouring countries.
Examples Beyond Africa
Saudi Arabia and Gulf States: Implemented tax stamps on tobacco under the Gulf Cooperation Council (GCC) framework.
While compliance is higher in these regions due to stricter customs enforcement, the associated costs are mitigated by government support and modern border infrastructure — conditions that are not currently in place in Nigeria.
United Kingdom:
Recently reformed its tax stamp regime in recognition that it was outdated, costly, ineffective, and confusing for businesses.
This reform highlights the bureaucratic burdens that legacy stamp-based systems can impose, serving as a clear warning to countries like Nigeria that are considering a similar excise stamp framework.
