Traders’ gains, losses in meeting with Museveni

President Museveni yesterday scrapped penalties imposed on traders for not enrolling on the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) but maintained that the government will continue collecting taxes despite their protestations.

He, however, ordered Uganda Revenue Authority (URA) to open shops it locked over the standoff, but said tax revenue is required to develop the country for current and future generations.

“I am 80-years-old and about to go to heaven. You are still young and have more years ahead. You will be the ones to suffer if we don’t plan and make this country better for you to live in,” Mr Museveni said in response to demands by traders that implementation of EFRIS be stayed.

He talked down the push by the businesspeople for reduction, among others, of taxes on imported garment, saying the levy is intended to discourage clothes manufactured overseas and protect domestic textile manufactures and markets.

Unable to win on their ultimate demand, some of the businesspeople, who assembled at Kololo Ceremonial Grounds in Kampala in record numbers, walked out at nightfall as the President was still speaking.

A number, however, returned or stopped mid-way their exit when the head of state pronounced himself on penalty waivers and instructions for the taxman to reopen shops shut over tax dispute which has endured for several months.

Information on URA website shows that EFRIS entails using Electronic Fiscal Devices (EFDs), e-invoicing and direct communication with “business transaction systems to manage the issuance of e-receipts and e-invoices in accordance with the Tax Procedures Code Act 2014”.

Put another way, once a transaction is initiated using any of the solution’s components, the transaction details would be automatically transmitted to the tax body in real time, resulting in the generation of electronic receipts and invoices.

This system of tax administration has been in use in different countries for years and Uganda adopted it in 2019, spending the first year to orient URA staff before a planned roll-out in 2020 ran into the headwinds of Covid-19 outbreak and disruptions.

The tax body following public consultations revived the implementation under the administration of Mr John Musinguzi, named URA Commissioner General in April 2020, piloting it with factories and supermarkets with existing sales systems that were easy to flawlessly interface with URA system.

These were already Value-Added-Tax (VAT) compliant businesses. However, other business segments complained that the new tax administration system was complicated, prompting URA to improvise web-based EFRIS.

This was to allow any tax payer with Internet-enabled computers or other devices to use EFRIS to stock sales and ease computation of tax liability for their businesses.

The traders, most of them in trading hub of Kikuubo of central Kampala, insisted they were unable to understand the new automated sale records and levy system, prompting URA at the start of 2023 to introduce what URA Commissioner General Musinguzi described as Desk Top App.

The merchants at the time said they did not have a sales system to install and interface with URA system, essentially seeking a preferential treatment if the taxman intended to take stock of their daily sales and applicable taxes.

After initial weeks of piloting Desk Top App version of EFRIS, traders complained that the platform was not user-friendly, prompting URA to develop the Electronic Fiscal Device (EFD) for which traders were required to each pay $100 (Shs380,000).

The merchants said they didn’t have that money, prompting URA to contrive a mobile version of EFRIS application downloadable on any smartphone.

At yesterday’s meeting, which followed a week-long protest by traders in mainly the capital, Kampala, President Museveni said businesspeople should use EFRIS version compatible with smartphones so that they do not have to incur unnecessary costs to comply.

“You can use a smartphone and buy a printer at Shs150,000 to attach to it. Therefore, I direct URA not to insist on EFRIS machine,” he said, adding, “The ones who can buy it let them buy it, but those who can’t afford it should use alternative means. There should not be any penalties for not buying an EFRIS machine.”

These wins were too small for traders to take home after a long wait for a highly-anticipated audience with the President, according to Mr Thaddeus Nagenda, the Kampala Capital City Traders Association (Kacita) chairman.

“[Today] we shall have a meeting with the traders to brief them about what the President said and then they would take a decision on the way forward,” he said.

Mr Nagenda said despite the misgivings, they were happy that Mr Museveni had halted the penalties and ordered that shops locked by the URA due to tax issues be opened.

The aggrieved traders last month locked shops in Kampala, choking supplies and stock renewals upcountry and in neighbouring countries.

The disruptions prompted President Museveni to meet their leaders, culminating in yesterday’s meeting at Kololo during which dozens of traders were allowed to ask questions, or raise their concerns, directly to the President.

They had in a previous memorandum complained that taxes levies on them were many and too high, including a new 18 percent above-rent payment that landlords introduced, which the traders argued were killing businesses while foreign nationals that duped the government, claiming to be investors, were rivalling local traders on retailing and driving out native entrepreneurs.  

They also questioned the abrasive methods of tax enforcement by URA and what they alleged was double taxation alongside presumptive tax assessment by the tax collector.

At the Kololo meeting attended by Prime Minister Robinah Nabbanja and other ministers, as well as URA honchos led by Commissioner General Musinguzi, President Museveni tasked leaders of the traders to engage with factory owners, whom he said had counter-claimed to him that the Ugandan businesses had declined to sell their products.

Applicable taxes, including Value-Added-Tax, which the traders said was being charged multiple times, must, however, be paid, the President insisted.

“You talked about VAT. I have studied it and I don’t see the danger of VAT because of our big aims as a country and I have shown you that Uganda can stand on its own … Therefore, this tax which is partly concentrating on the narrow spectrum of imported products should not be opposed. You would be wrong if you opposed such a tax,” he said.

This did not, however, go down well with some of the businesspeople who heckled back.

The President’s offer that KACITA and URA leaders meet and work out finer details on timelines on when and how to pay such tax did little to assuage the anger of the traders, prompting some to walk out in protest after he suggested another meeting on June 20 to resolve any outstanding issues.

“My dear friends, I had wanted to meet you again in June, but you refused. I have no problem if you don’t want to meet me. For those who don’t want to meet me again, God is there. Those who can, come back here on June 20,” he said.

The President said they will heavily tax imported goods that can be manufactured in Uganda as a way of discouraging traders from such business.

“Our taxation of those goods is deliberate,” he said. “Uganda is spending $800m on importing garments. That means the money we get from coffee we sell abroad goes back on buying clothes [from garment exporting countries]. …how long will we allow this bleeding?”

He said they would continue taxing VAT at all levels because it brings in more revenue to the government than sales tax, which was repealed in 1996.

Traders’ complaints and President’s response

Traders Association Chairman, Mr Thaddeus Nagenda: Traders want to pay Value-Added-Tax once at the level of the manufacturer, or at the border, when they are importing goods.
 
President Museveni: The old method (Sales Tax) wasn’t good enough. Sales Tax was collected at factory level only. For instance, a bag of sugar worth Shs100,000, we would charge only 18 percent as tax, which is Shs18,000. The country needs taxes. Using VAT, each level in the chain of distribution pays a tax, but it is small. This achieves two things: more taxes collection, each level contribution to tax is small.
 
Mr Nagenda: Manufacturers should stop dealing directly with the retailers or customers.
 
Mr Museveni: I tried to check with the factory owners. I was told by the factory owners that traders refused to sell their products. Your leaders, manufacturers and I should meet to get a solution.
 
Mr Edward Ntale: Taxes on imported garments should be reduced.
 
Mr Museveni: We are spending a lot of money on imported products. The taxation is meant to ensure a stop of importation of consumer goods. This will lead to establishment of 11 textile factories here. This will create jobs and income at all levels from the cotton growers and loaders to the factory.  
 
Mr Issa Ssekitto, Kacita spokesperson: The taxes are destroying Uganda’s position as a re-export hub in the region.
 
Mr Museveni: You say you have killed our re-exporting of other people’s merchandise. I don’t want Uganda to be Dubai (a luxury and ultra-modern shopping hub in the United Arab Emirates). Dubai was like that because it had nothing. It was a desert. Therefore, re-exporting products from Malaysia and China was better than having nothing. But Uganda is rich with raw materials. If you re-export, you are wrong.  We shall get more advantage if we export products made from Uganda.
 
Mr John Kabanda: EFRIS should be stopped because the traders have lower education levels to understand its operations.

Mr Museveni: I saw the EFRIS machine myself and I tried to use it. I think you can learn how to use it. But if you don’t want to use it, they say you can use your smartphone. You don’t have to buy an EFRIS machine of Shs6 million. What’s the cost of a smartphone? You can use a smart phone and buy a printer of Shs150, 000 to attach to it. Therefore, I direct URA not to insist on EFRIS machine. The ones who can buy it let them buy, but those who can’t afford it should use alternative means. There should not be any penalties for not buying an EFRIS machines.