Despite meeting the President to scrap off Uganda Revenue Authority EFRIS as stambling block to business, President Yoweri Museveni has maintained EFRIS
Thousands of traders shut their shops in Kampala to attend special meeting with President Museveni at Kololo Independence Ground with hope of EFRIS scraping unfortunately walked home desperate.
President Museveni agreed to delve deeper into the issues surrounding the Electronic Fiscal Receipting and Invoicing Solution (EFRIS)
The announcement marked the end, for now, of protests that erupted in opposition to the Uganda Revenue Authority’s (URA) push towards digital tax administration, aimed at enhancing tax collection.
URA officials have argued that EFRIS, initially rolled out in 2021 targeting manufacturers and large businesses, is crucial for reducing tax evasion by ensuring accurate transaction records and the alignment of input and output tax, which would bolster the country’s tax-to-GDP ratio.
The traders had demanded that EFRIS be suspended and increase the annual turnover threshold for enrollment from Shs150 million to at least Shs1billion as some of the reasons for the protest.
They also argued that the current 18% VAT, applied repeatedly throughout transactions, results in double taxation, diminishing their competitiveness especially relative to Kenya, where the VAT is set at 16%.
Traders have also contested, the import duty rates on textiles and garments, currently standing at 3.0 and 3.5 USD per kilogramme respectively, as very high. They argue that these rates not only inflate business costs but also foster smuggling, leading to numerous uncleared containers at customs.
They also criticize the URA’s inconsistent valuation guidelines for imported and exported goods, which they say impede effective business planning and put them at a disadvantage compared to their regional peers.
In addition, traders also raised issues about the alleged unprofessional behaviour of URA enforcement officers and the steep interest rates, ranging from 17-36%, imposed on local businesses.
These conditions, traders claim, contrast with the more favourable terms offered to foreign competitors, notably Chinese companies, who benefit from lower credit rates and additional business incentives.
EFRIS is a good initiative but poorly implemented
However, the Uganda Manufacturers Association has offered support for the EFRIS but faults government agencies on aspects of its implementation.
UMA Chairman, Deo Kayemba, said while the system is vital to ensure proper tax administration, the taxpayers do not understand it, nor do they even understand the tax regime, a situation that should have called for proper sensitization of the masses before implementation.
He said the installation of the equipment to process the electronic invoices and receipts is supposed to be a responsibility of URA, and that traders who have installed them should have some compensation.
He also said the penalty of Shs 6 million to defaulting traders is unfair and that the implantation should have been in a phased way to ensure that the system is adopted steadily and smoothly.
The manufacturers also suggested that VAT should be payable by businesses that are at least US$50,000 (about Shs 191 million) in capitalization, which is also the amount that is required for a local investor to get an investment license.
Kayemba called on the authorities to continue dialoguing with the aggrieved traders to find solutions to all the outstanding issues that have led to the disruption of the trade order in the country. These also include complaints about manufacturers that have established retail outlets for their products, which, he agrees, is a real example of unfair trade competition.
