Explainer: Understanding EFRIS, the spark of URA’s war with traders 

Over the past three weeks, a dispute has unfolded between the Uganda Revenue Authority (URA) and city traders represented by several associations including the Kampala City Traders Association (KACITA), Uganda Cargo Consolidators, and Kampala Rice Traders.

The contention centers on the enforcement of the Electronic Fiscal Receipting and Invoicing Solution (EFRIS), which some traders have mistakenly labeled as a new tax imposition.

EFRIS is designed to monitor the payment of value-added tax (VAT) and facilitate accurate record-keeping for business transactions, thereby simplifying VAT collection. Despite its intended benefits, the implementation of this system has met with resistance from the business community.

Major protests have erupted, with shops being closed in Kikuubo and downtown Kampala. Traders have expressed concerns about what they perceive as double taxation and have criticized the lack of adequate information regarding the system’s operation and objectives.

Furthermore, traders argue that the EFRIS system incurs high implementation costs as it necessitates the use of modern technological tools such as computers or smartphones and additional equipment for printing receipts. This financial burden has added to the traders’ grievances and fueled the ongoing disagreements with the URA.

Part of the memo to traders calling for a four-day nationwide demonstration against EFRIS states, “The EFRIS system should revert to manufacturers and major suppliers, rather than small businesses, thus violating trade directives where manufacturers engage in wholesale and retail to end-users, particularly Chinese.”

Traders argue that the high import values (previously set) are hindering their ability to clear goods, and the escalating cost of living is rendering essential goods unaffordable to the average consumer.

New tax proposals

In April 2024, the ministry of Finance, Planning and Economic Development proposed various measures to increase revenue in the next financial year, which has escalated the tax burden and elicited discontent among the business community. According to the proposed bills, the government plans to levy an excise duty tax of Shs 500 on a bag of cement, grout, lime, and adhesives.

Additionally, it suggests a 10 percent tax, or Shs 75, on bottled mineral water or any water intended for drinking purposes. As outlined in the Excise Duty Amendment Bill 2024, the government aims to raise taxes on fuel products by Shs 100 per liter, setting petrol at Shs 1,550, diesel and other fuels at Shs 1,230, and kerosene at Shs 500.

Furthermore, there is a proposal for a five percent withholding tax on gains from the sale of land in cities and municipalities, sales of rental properties, and shares in private companies. Presently, the real estate sector is subject to a 1.5 percent stamp duty on land purchases, transfer taxes, rental income tax, property rates imposed by municipalities, and VAT on all construction materials.

In response to these proposals, the speaker of parliament, Anita Among, urged the committee on Finance, Planning and Economic Development to ensure thorough public consultation and prompt reporting. “Additionally,” she stated, “the minister of Finance, Planning and Economic Development and the attorney general should prepare accordingly.”

About EFRIS

The Observer has learned that prior to the implementation of EFRIS, URA conducted 81 workshops downtown and established a tax hub in Kikuubo, running for 10 days and registering over 350 participants daily. Additionally, they visited over 110 shops, reaching more than 15,000 establishments.

This publication has found that due to many businesses being unable to afford computers, which were not initially budgeted for to install EFRIS software, URA developed a smartphone application. This application allows businessmen to issue EFRIS receipts to their clients, facilitating compliance.

As of now, at least 97 percent of businesses with a turnover exceeding Shs 150 million have registered for EFRIS, leaving only three percent unregistered. Since the system’s implementation, the VAT collection rate has reached 15%.

Since its launch in 2022, there has been an increase in technology adoption, driven by the acquisition of electronic fiscal devices by various businesses. Additionally, the development of mobile applications and desktop programs has streamlined VAT collection. Initially, EFRIS was introduced to manufacturers and later extended to supermarkets.

URA, PSFU meeting

Prior to the planned demonstrations, URA convened a meeting with city traders represented by umbrella bodies such as the Kampala City Traders Association (KACITA), Uganda Cargo Consolidators, and Kampala Rice Traders.

During this meeting, it was agreed to suspend the demonstrations and instead focus on intensifying awareness campaigns about EFRIS. Additionally, URA committed to opening an office in Kibuubo to provide business support services, including assistance with the adoption of new technologies like EFRIS, aiding taxpayers in filing returns, and addressing any other tax-related inquiries.

The tax authority reiterated its readiness to address operational concerns regarding the enforcement of EFRIS and encouraged the business community to reciprocate by demonstrating voluntary compliance and willingness to embrace change and adopt new technologies.

URA Commissioner General speaks

According to John Musinguzi, the commissioner general of URA, EFRIS captures what constitutes part of an individual or entity’s VAT. It accounts for expenses incurred in one’s business, subtracting what has been collected at the point of sale.

Musinguzi emphasizes that EFRIS should bring satisfaction to taxpayers. He suggests enhancing awareness of its benefits and educating the public, as misinformation has been sponsored by certain parties. He notes instances where individuals below the VAT threshold claim their businesses will collapse, despite not being registered for presumptive tax.

“EFRIS should bring satisfaction to taxpayers. What we need to do is enhance awareness of its benefits and educate the public, as some individuals spreading misinformation against it. I’ve encountered cases of people below the VAT threshold predicting their businesses will collapse, even though they are not registered on the presumptive tax register,” he said.

He urged against spreading misinformation that could further antagonize URA, which already faces challenges with tax compliance. He highlighted EFRIS as a technology that simplifies the monthly tax return process, reducing the need for hiring accountants. Furthermore, he clarified that EFRIS does not increase tax burdens but eliminates intermediaries who previously withheld funds.

Secretary To Treasury speaks

Ramathan Ggoobi, the secretary to the Treasury, recounted an incident when President Yoweri Museveni summoned him one morning to meet with traders and identify their challenges for resolution. He highlighted that among the issues raised by the traders was EFRIS.

“EFRIS is not a tax; it is a system used to collect tax. Because Ugandans are not accustomed to paying taxes, some evade it while others avoid it. They are resistant to a system that restricts their ability to evade taxes. EFRIS functions like a CCTV camera, monitoring transactions from both the supply and demand sides of the entire ecosystem,” he explained.

“I urge everyone to understand that EFRIS is here to stay. It ensures accurate declaration of earnings from transactions, thereby enhancing revenue generation. It is non-negotiable; we will implement it rigorously to apprehend tax evaders,” Ggoobi asserted.

He also addressed concerns about foreigners engaging in retail business, assuring that this issue would be addressed based on factual evidence, with nationals having beneficial ownership.”

City traders react

Shadia Mukyala stated that the taxes imposed on them are extremely high, a problem the government has failed to address.

“Due to the high taxes, they are also forced to increase the prices of the clothes they sell in order to get some profits and also pay the property owners. At the end of the day, you find out that you are only working for taxes and the landlord because of the various taxes we are supposed to pay,” Mukyala said.

Mukyala stated that the increasing number of foreigners has become a threat to them and their livelihood, claiming that after buying quality clothes from Turkey, Thailand and Dubai, the Chinese will just copy that and make many duplicates, which they sell at lower prices, hence kicking them out of the business.

Edirisa Mugisha, a trader working at the Park View building, stated that ever since the lockdown was lifted, the situation has never been the same for them because taxes were greatly increased plus rent prices.

“I think the government wasted a lot of money during the COVID-19 pandemic; so, it’s trying to gain it back by overtaxing us,” said Mugisha.

Mugisha said the Chinese came to Uganda as investors and ended up selling products to final consumers at extremely low prices due to their ability to coordinate with their fellows back home, and they were able to bring lots of old clothes into the country, yet the government banned them.

“Chinese should stay in factories as investors and exit buildings and hawking because they are slowly chasing us out of the business, yet in China, it is very difficult for a foreigner to start up a business; however, the government favors them at our expense,” he said.

Cissy Namukasa said they are to continue with their strikes until the government comes out and addresses their challenges. Shs said EFRIS is better when imposed on factories and big companies because it can easily be followed up.

She said the government should come up with a clear stance on the issue of foreigners and standard prices for the goods in the country, which will help to curb the issue of exploitation by the Chinese, who sell the same products at lower prices.

Henry Tamale, the deputy spokesperson of the Federation of Uganda Traders Association (FUTA) and a trader in Kampala, feels the increasing burden of taxes. People have lost jobs and businesses; therefore, businesses; therefore, the government will not have enough tax bases.

“We are not against the government policy of tax collection, but again, we are against how these policies are being implemented. We decided to take up the strategy of demonstration so that our voices could be heard. KACITA was not doing its mandatory duty of helping the business community understand the existing regulations and how they are supposed to be conducted,” he said.

Salim Mukasa, who deals in spare parts in the Kisekka market, says the hike in taxes has forced traders to stop using receipts in the purchase of goods so they can find ways to avoid paying taxes. Currently, when you buy spare parts from our shops, we no longer issue receipts due to the ever-increasing taxes.”