Ugandan Manufacturers Urge Government to Pause Penalties Under Electronic Tax System

Manufacturers in Uganda are calling on the government to temporarily halt the enforcement of penalties under the Electronic Fiscal Receipting and Invoicing System (EFRIS).

The request comes amid concerns from traders about the high cost of compliance, lack of understanding of the system, and its application to all traders regardless of VAT registration status.

President Yoweri Museveni met with a delegation of 61 trade leaders, including representatives from the Federation of Uganda Traders Association and the Kampala City Traders Association (KACITA), at State House Entebbe to discuss the EFRIS issue.

During the meeting, Museveni agreed to meet with technocrats from the Ministry of Finance, Planning and Economic Development and the Uganda Revenue Authority (URA) on April 24, 2024, for wider consultations. He also said he will later meet with all traders on May 7, 2024, at the Kololo Independence Grounds.

In response to the traders' concerns, Museveni directed the URA to suspend all penalties related to EFRIS non-compliance and refrain from recovering any penalties that had already been imposed. However, he emphasized that businesses must continue to fulfill their tax obligations as usual. The agreement to reopen shops marks an important step towards normalizing economic activities in the country while awaiting more permanent solutions from the ongoing consultations.

Why this matters: The implementation of EFRIS has led to widespread protests and business shutdowns by traders in Uganda, impacting the economy. The government's decision to pause penalties and engage in further consultations with stakeholders aims to address concerns and find a resolution that balances tax compliance with the needs of businesses.

The URA Commissioner General, John Musinguzi Rujoki, has rejected calls to suspend EFRIS entirely, arguing that it would lead to inequity in tax payments. He stated that implementing EFRIS across the board will ensure fairness in tax collection, especially VAT, and could potentially double the total VAT collections from UGX 3.5 trillion to about UGX 7 trillion.

Musinguzi acknowledged the operational challenges with the system but said it will be constantly monitored and improved over time as the technology becomes more user-friendly.

The strike by traders, which began on April 8, 2024, has seen the majority of shops in downtown Kampala closed, creating a domino effect on businesses. Vendors, such as plantain seller MJ Lambeka and chapatti vendor Moses Mukisa, have experienced a significant drop in daily sales, leaving their families struggling. The protest has also impacted other sectors, including restaurants, taxi drivers, and boda boda (motorcycle taxi) riders.

As consultations continue between the government and trade leaders, the temporary suspension of EFRIS penalties offers a glimmer of hope for resolving the impasse. President Museveni's upcoming meetings with technocrats and traders aim to address key issues, including the review of different taxes, the expulsion of foreign traders from shops in central Kampala, and the sensitization of the public before the full implementation of

Key Takeaways

• Ugandan manufacturers call for temporary halt on EFRIS penalties
• Museveni to meet technocrats and traders to address EFRIS concerns
• URA suspends EFRIS penalties, but businesses must fulfill tax obligations
• EFRIS implementation leads to widespread protests and business shutdowns
• Consultations aim to balance tax compliance with business needs