Traders in Uganda Protest Electronic Tax System Amid Concerns Over Costs and Penalties

The implementation of the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) by the Uganda Revenue Authority (URA) has sparked a heated debate among traders in the country. The EFRIS system, which requires businesses with an annual turnover of at least Shs150m or daily gross sales of Shs420,000 for three consecutive months to issue electronic receipts and invoices, has been met with resistance from various traders' associations.

The Kampala Capital City Traders Association (Kacita) has expressed concerns about the high costs and complexity of implementing the EFRIS system, particularly for small and informal businesses. They argue that the additional investments in hardware, software, and skilled personnel required by the system add to the financial burden on businesses. Furthermore, the strict penalties for non-compliance, such as fines of up to Shs30m or 10 years in jail, have exacerbated the traders' concerns.

In response to the protests, the URA has announced plans to establish an office in downtown Kampala, known as Kikuubo, dedicated to providing EFRIS services to traders and taxpayers. The government has also committed to increasing sensitization efforts and providing support to help traders adapt to the new system. Penalties for non-compliance will be applied with restraint to allow time for taxpayers to familiarize themselves with EFRIS, and the URA Commissioner General will submit a list of traders with outstanding penalties for possible waiver consideration.

The ongoing strike by traders in Kampala, now in its third day, has led to the closure of over 300 arcade outlets and 3,000 general merchandise shops in the city. The strike has also impacted the transport sector, with taxi, bus, and boda boda operators experiencing significant losses due to the absence of traders and the resulting decrease in foot traffic and economic transactions. The Old Taxi Park, which caters to over 200,000 passengers daily, has been particularly affected.

The Ministry of Finance has pledged to consult with traders regarding potential increases to the Value Added Tax (VAT) threshold and reductions in the VAT rate. The government has also acknowledged the need to address broader concerns about business sustainability, including the impact of high interest rates charged by money lenders. Legislators have called for nationwide sensitization efforts on EFRIS and suggested reviewing the Tax Procedures Code to address concerns about penalties and regulations related to the system.

Why this matters: The ongoing debate surrounding the EFRIS system in Uganda highlights the challenges faced by small businesses and informal traders in adapting to new tax regulations and electronic systems. The strike by traders in Kampala underscores the deep interconnectivity of various sectors within the economy and the potential for widespread disruption when key stakeholders, such as traders, are impacted by policy changes.

As the strike enters its third day, the government and the URA are working to address the concerns raised by traders and find a balance between implementing the EFRIS system and supporting businesses in their transition. The outcome of these discussions and the effectiveness of the proposed measures will have significant implications for the future of tax collection and the sustainability of small businesses in Uganda.

Key Takeaways

• Uganda's EFRIS system requires e-receipts for businesses with >$42k annual turnover.
• Traders' associations protest high costs and penalties for non-compliance with EFRIS.
• URA to open EFRIS office in Kampala, increase sensitization, and consider penalty waivers.
• Traders' strike in Kampala has disrupted businesses and the transport sector.
• Govt. to consult traders on VAT threshold, rates, and broader business sustainability concerns.