The URA-traders debacle can be resolved amicably

For the past two weeks, Ugandan traders, under their umbrella body – The Federation of Ugandan Traders’ Association (FUTA) – have been at loggerheads with Uganda’s revenue collection body.

This came in after angry traders declined to open their shops whilst demonstrating against alleged high taxation by Uganda Revenue Authority on the Monday April 8, 2024.

The traders, who were later joined by Kampala City Traders Association (KACITA) and other unions, decried URA’s implementation of the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) that was recently introduced in a bid to curb tax evasion in the Value-Added Taxation chain.

It is not the first time that businesspeople have tried to challenge the implementation of EFRIS recently. In 2020, for example, a group of supermarkets sought a temporary injunction in High Court seeking orders that URA is restrained from enforcing EFRIS in supermarkets.

In fact, traders have threatened to conduct more intensified countrywide business closure in addition to petitioning both Parliament and Ministry of Finance as a means to address concerns relating to EFRIS. In their belief, the traders allege that URA has imposed a relatively new cumbersome tax that has increased the tax burden to insurmountable levels.

URA, on the other hand, maintains that EFRIS is merely a receipting and invoicing system that entails direct communication with business transaction systems to manage the issuance of electronic invoices.

If the current debacle were to take any longer, it would have wide disastrous impacts on the economy. In the first place, the trader’s actions have stalled business in the country which will lead to reduced revenue collections at the end of the financial year.

It is therefore pertinent that solutions are found before catastrophic and irreversible implications of the URA-FUTA traders increase. To find these solutions, one needs to understand the basis upon which the conflict arises.

In the past few years, URA continuously registered a poor performance in VAT collections as a result of persistent invoice trading which, accordingly led to a revenue losses estimated at Shs 28 billion per year.

This invoice trading is one of the manifestations of VAT fraud. In most instances, traders and other businesspersons have suppressed sales and deliberately refuse to issue tax invoices. In other instances, they issue invoices that are over and above their actual sales in order to obtain false refund claims. At times, these businesses create fictitious purchases with no movement of goods or services.

As a measure against any sort of tax hemorrhage arising from this invoice trading, URA devised an electronic system to easily verify and issue traceable invoices for use in people’s businesses.

This electronic system ensures a centralized issuance and tracking of all invoices and receipts by taxpayers in Uganda for every transaction undertaken. The systems has a 24-hour surveillance and monitoring that could have enraged the erstwhile beneficiaries of VAT fraud.

In as much as this system will ensure that VAT fraud is combated, there’s need for the tax body to engage different stakeholders on how it operates. It is evident, at least from the arguments fronted by taxpayers who erroneously believe that EFRIS is a form of tax, that most of the traders, especially those in downtown business operating areas, were not trained about how EFRIS operates.

URA has made great strides in tax education. However, this has not extended to how certain machinery like the Electronic Fiscal Device (EFDs) are operated. The EFRIS system is not a standalone system. It requires software integrators, devices, data connectivity, among others whose operations traders ought to have been taught.

URA should benchmark from other countries where similar systems are being used. In Rwanda, for example, any person that carries out any taxable activity has to issue an invoice generated by an electronic invoicing system (EIS) certified by the Rwanda Revenue Authority.

The system works by entering the quantity, price, and code of each item being sold. Once this is issued, a duplicate invoice is kept for accountability purposes. This negates any concerns about the revenue body cheating a taxpayer where the invoice is self-issued. Uganda could borrow a leaf from this mode of operation.

Above all, there needs to be a stakeholder engagement between taxpayers and URA to find amicable solutions in order to quell the flaring tempers. An engagement between FUTA and URA would resolve the crisis that has left all Ugandans bereft of words.