I. Introduction
The Ethiopian Ministry of Finance has introduced Directive No. 1004-2024, establishing a new excise stamp management system. This directive marks a significant stride towards enhancing tax collection efficiency, curbing illicit trade activities, and safeguarding public health. It mandates the affixation of either physical or digital excise stamps, each bearing a unique identifier, on a range of excisable goods manufactured within or imported into Ethiopia. The directive meticulously outlines the technical specifications for these stamps and identifiers, details the application and issuance processes, specifies associated fees, and delineates the obligations of manufacturers, importers, and a designated third-party company responsible for the system’s implementation and ongoing maintenance. Furthermore, it sets forth procedures for the proper affixation, return, and management of excise stamps, alongside provisions for inspections, enforcement measures, and penalties for non-compliance. The new regulations became effective upon the directive’s official registration and publication in May 2024.
II. Background and Purpose
The directive is founded on the conviction that an excise assurance system, utilizing digitized or physical stamps, is indispensable for achieving several critical objectives:
- Proper Collection of Excise Tax: The system is designed to ensure that all liable excisable goods are accurately accounted for and taxed in accordance with the law, thereby maximizing government revenue.
- Prevention of Illicit Trade: Through the incorporation of unique identifiers and robust track-and-trace capabilities, the system aims to significantly impede the trade of counterfeit or smuggled goods, bolstering market integrity.
- Protection of Public Health and the Environment: By establishing stringent controls over the supply chain of excisable goods, the directive indirectly contributes to the protection of public health and environmental well-being.
The “WHEREAS” clauses within the directive explicitly articulate the necessity of developing an “Excise Tax Management System which facilitates enforcement of excise tax laws, brings transparency and accountability, and helps in the track and trace of the production and distribution of excisable goods.” This foundational statement underscores the comprehensive nature of the system’s intended impact.
III. Scope of Application (Article 3)
The directive mandates the affixation of excise stamps on the following categories of excisable goods when they are either imported into or manufactured in Ethiopia:
- Compounded spirits
- Alcoholic and non-alcoholic beer
- Wines and fortified wines (with an alcoholic content greater than 0.5%)
- Ready-to-drink (RTD) alcoholic beverages (with an alcoholic content equal to or greater than 2%)
- All forms of tobacco products
- Bottled water
- Non-alcoholic, carbonated, and sweetened beverages
The Minister retains the authority to designate additional goods requiring excise stamps in the future. The Tax Authority is further tasked with issuing subsequent directives within 90 days of the effective date, providing detailed mechanisms for the specific affixation requirements for each category of goods.
IV. Key Definitions (Article 2)
To ensure clarity and consistent interpretation, the directive defines several key terms:
- Excise stamp: This term broadly encompasses physical stamps, digital stamps, or any other mark officially approved for affixation.
- Unique Identifier (UI): A numeric or alphanumeric string associated with a single, unique code, primarily used for monitoring excisable goods throughout their lifecycle.
- Company: Refers to an entity appointed by the Tax Authority to provide UIs, print stamps, manage the integrated system, and undertake related activities.
- Management System: Denotes the overarching system that includes excise stamps, a track-and-trace system, production accounting functionalities, and all associated software and hardware components.
- Relevant economic operators: This category includes manufacturers, importers, wholesalers, and distributors involved in the supply chain of excisable goods.
V. Requirements of Excise Stamps (Article 4)
Every excise stamp issued under this directive must fulfill specific requirements to achieve its intended purpose:
- It must incorporate a Unique Identifier as specified in Article 5 of the directive.
- It must be designed to deter counterfeiting, ensuring its authenticity and integrity.
- It must facilitate tracking of the excisable goods along the entire supply chain, from production/importation to retail.
- It must enable accurate accounting for production or importation volumes.
- It must allow for verification of authenticity by any party within the supply chain, enhancing transparency and trust.
- For tobacco products, the stamp must also include markings specified under Article 8 of the WHO Protocol to Prevent Illicit Trade of Tobacco Products, aligning with international standards for tobacco control.
VI. Requirements of Unique Identifiers (UIs) (Article 5)
The Unique Identifiers (UIs) are central to the system’s functionality and must adhere to the following criteria:
- They must comply with the ISO/IEC 15459-2:2015 standard, ensuring international compatibility and reliability.
- They must be presented to and approved by the Tax Authority before implementation.
- They require relevant economic operators to record the movement of excisable goods in the system, providing a comprehensive audit trail.
- They may potentially be generated by an independent third party (‘ID issuer’) appointed by the Tax Authority, ensuring impartiality and expertise.
- They must incorporate specific information, including:
- The place of manufacturing.
- The manufacturing facility.
- The product description.
- The intended market of retail sale.
- The intended shipment route.
- Where applicable, the importer.
The ID issuer is responsible for maintaining flat-files to enable the Tax Authority to decode UIs offline, ensuring data accessibility. Provisions are also included for marking and recording aggregated packaging while maintaining the traceability of individual unit packets.
VII. Appointment of a Supplier (Article 9)
The Ministry of Finance will appoint a “Company” through a public procurement process. This appointed Company will be responsible for:
- Developing, installing, and maintaining the UI generation system.
- Printing and supplying excise stamps as required by the directive’s Schedules.
- Supplying and maintaining system components for manufacturers and importers.
- Installing other related systems, potentially including a single secure printing facility.
This “Company” will operate at the request of the Tax Authority and is strictly mandated to maintain the confidentiality of taxpayer business secrets, ensuring data privacy and security.
VIII. Application and Issuance of Excise Stamps (Articles 7 & 10)
Manufacturers and importers are required to apply to the Tax Authority for excise stamps using a prescribed format at least sixty days prior to the commencement of manufacture or import. For importers, evidence of importation is generally required, with potential exceptions under specific undertakings. Excise stamp fees, as detailed in a separate Schedule, are payable to the appointed “Company” at least 15 days before the stamps are issued. The “Company” will only issue or print stamps after the UI batch has received approval from the Tax Authority. The Tax Authority may also direct the “Company” to deliver stamps directly to manufacturers or importers, streamlining the supply chain.
IX. Affixation of Excise Stamps (Article 11)
The directive specifies clear guidelines for the affixation of excise stamps:
- For locally manufactured goods, stamps must be affixed at the production facility immediately after packaging.
- For imported goods, affixation generally occurs at the customs post or a designated place before clearance. The Tax Authority may, under specific conditions, permit affixation at the exporting country’s production facility.
- Digital stamps may be printed directly on each package using indelible security ink.
- Manufacturers and importers are obligated to declare the used excise stamps in the system immediately after affixation, ensuring real-time data capture.
X. Excise Stamp Fees (Article 6)
Fees for excise stamps will be specified in a separate Schedule issued by the Ministry of Finance and are payable directly to the appointed “Company.”
XI. Return, Wastage, and Transfer of Excise Stamps (Articles 12, 13, & 14)
The directive outlines procedures for managing unused, damaged, or unaccounted-for stamps:
- Return of Unused Stamps: Unused printed excise stamps must be returned to the Tax Authority under specific circumstances, such as cessation of manufacturing, discovery of defects, or discrepancies.
- Refunds: Refunds for returned stamps (excluding those due to discrepancies or manufacturing cessation) will be provided by the “Company.”
- Damaged Stamps: Damaged stamps must be preserved for verification. After verification, wastage or damage will be destroyed in the presence of a Tax Authority representative.
- Unaccounted-for Stamps: Unaccounted-for stamps will result in the computation of excise duty based on the highest applicable rate, with a maximum allowance of 1% for wastage and damages.
- Transfer of Stamps: Transfer of printed excise stamps between units owned by the same manufacturer/importer requires prior approval from the Tax Authority.
XII. Excise Stamp Management System (Part Three, Articles 16-26)
Manufacturers and importers are mandated to facilitate the installation of the “System” (comprising software, hardware, and applications) at their premises, bearing the associated costs. This “System” includes elements for UI management, verification, authentication, production accounting, and data transmission to the Tax Authority. The appointed “Company” will handle the installation, integration, and maintenance of the system under the supervision of the Tax Authority. The Tax Authority is responsible for defining system requirements and overseeing the installation process. Manufacturers and importers will receive advance notification of new or modified systems and are responsible for making necessary adjustments to their equipment. Procedures for reporting and securing inoperative production lines are also outlined. Manufacturers and importers are ultimately responsible for the security of the installed “System.” Advance reporting requirements for new brands, packaging changes, and system modifications are also stipulated.
XIII. Marking of Duty-Free Products (Article 27)
Duty-free and export excisable goods must bear distinct markings for track-and-trace purposes. These markings, including the country of final destination, “FOR USE IN ETHIOPIA,” or “DUTY FREE” as applicable, must be printed on the wholesale packaging to ensure clear identification and prevent diversion.
XIV. Exemptions from Excise Stamps (Article 28)
Certain excisable goods are exempt from the requirement of printed excise stamps:
- Goods imported or purchased duty-free by privileged persons or institutions.
- Goods destined for export.
- Goods in transit.
- Small, non-commercial quantities imported via postal service.
- Imported samples.
All these exempted goods, with the exception of those in transit, must be clearly marked “Duty Free.”
XV. Obligations for Verification (Article 29)
The Tax Authority is responsible for conducting public awareness campaigns regarding excise stamps. All actors in the supply chain—manufacturers, importers, distributors, and retailers—are obligated to verify the authenticity of excise stamps before accepting goods. They may be required to demonstrate the use of appropriate verification applications to ensure compliance. Distributors and retailers, in particular, must maintain supplier documentation and ensure adequate lighting conditions for proper stamp verification.
XVI. Refusal to Issue Excise Stamps (Article 30)
The Tax Authority reserves the right to refuse the issuance of excise stamps to entities that have not adequately accounted for previously issued stamps or have failed to comply with existing excise tax regulations.
XVII. Seizure of Excise Stamps, Equipment, and Goods (Article 31)
The Tax Authority is empowered to seize:
- Counterfeit excise stamps or stamps held unlawfully.
- Vehicles used in the illicit storage or transport of unstamped excisable goods.
- Equipment employed in the manufacture of counterfeit stamps.
- Excisable goods bearing counterfeit or improperly affixed stamps, or lacking the required stamps.
XVIII. Disposal of Forfeited Items (Article 32)
Seized items will be disposed of in accordance with the procedures outlined in the Customs Proclamation, ensuring legal and transparent handling of forfeited goods.
XIX. Transitory Provision (Article 33)
Economic operators are granted a 120-day grace period from the Tax Authority’s public announcement of accepting stamp applications to ensure that all excisable goods in their possession are affixed with excise stamps. This deadline may be extended in cases of force majeure.
XX. Effective Date (Article 34)
The directive officially entered into force upon its registration with the Ministry of Justice and its publication on the Ministry of Finance’s official website in May 2024.
XXI. Conclusion
The Excise Stamp Management Directive No. 1004/2024 represents a significant and comprehensive initiative aimed at strengthening excise tax administration in Ethiopia. Its multi-faceted framework, encompassing both physical and digital stamps, is designed to enhance revenue collection, vigorously combat illicit trade, and foster greater transparency throughout the supply chain of excisable goods. The successful implementation of this directive will hinge critically on the effective and coordinated collaboration among the Tax Authority, the newly appointed “Company,” and all relevant economic operators. Furthermore, the forthcoming directives and schedules, which are expected to be issued within specified timelines, will provide crucial granular details essential for the practical and effective application of these new regulations, ultimately contributing to a more robust and accountable excise tax system in Ethiopia.