Many governments have lost revenues in millions each year due to illicit trade of tobacco, cigarettes and alcohol. To prevent lost tax revenue, it is essential to plug loopholes in the supply chain as the chances of tax evasion are ample once products cross international borders for sale. In order to combat illegal trade of such products, the Digital Tax Stamp (DTS) was introduced to tighten control over the suppliers’ commitment to pay excise tax and monitor the production and import of excise goods to enhance tax proceeds.

After UAE’s Federal Tax Authority (FTA) introduced Digital Tax Stamp (DTS) in 2019, Oman Tax Authority (OTA) was next in line to roll out digital tax stamp system in the country with De La Rue International, a company specialized in designing distinctive stamps. The system helps fight the illegal import of counterfeit cigarettes, tobacco products and other excisable goods. This move also complies with the WHO Framework Convention on Tobacco Control (WHO FCTC), together with the European Union directives on tobacco products.

The functioning of DTS system

The clandestine distribution and sale of tobacco products not only deprives the government of tax revenues but also poses potential health consequences for consumers. That’s why the Track and Trace process is designed to secure the movement of goods throughout the supply chain.

Taking the form of a label or code (with digital data) placed on selective excise goods, DTS is one of the latest systems for tracking the movement of goods and certifying genuineness of products. The data is read by scanning the stamps, which reveals the movement of the product from the date of manufacture to its final display in outlets. The system feeds the tax authority’s electronic database, where data is analyzed to ensure the correct amount of revenue has been paid and any violations are alerted.

The benefits

• A centralized tax stamp system enables an effective and efficient control on sales of excisable goods that will not only enhance tax proceeds, but also protect citizens from contraband products while ensuring fair trade practices.
• As digital tags clamp down trade of illegal excise goods, the public has access to only authentic products and are protected from consumption of substandard products that have harmful effects.
• The systems’ transparency also helps manufacturers to have more organized records of their production.
• The multi-level security features a traceability element for supply chain visibility. This combats different forms of criminal activity and infuses security in the supply chain movement.

Note the dates as DTS goes into effect in Oman

• With effect from June 30, 2022, importers and local manufacturers of excisable products in Oman have been obliged to affix tax stamps on tobacco packaging.
• From October 14, 2022, cigarettes and tobacco products without digital tags will be prohibited from entry into the country.
• Going into 2023, all tobacco products will be barred from import, distribution or sale within the country if they lack tax stamps.
• The Oman Tax Authority said it will gradually expand coverage of digital tagging to include other excisable goods in a phased manner

Should you have any queries related to the tax system in the GCC region feel free to get in touch with our Tax Experts or send an email to enquiry@legendsaccounting.com