Strategies for business sustainability in a volatile economy

As we navigate through the complexities of economic challenges, one significant concern emerges: the looming threat of escalating costs driven by expected fuel tax hikes. 

To mitigate the adverse effects of the proposed fuel tax hike, proactive strategies must be implemented within the business community. 

Firstly, there is a pressing need to reevaluate production processes to minimize costs. This may entail streamlining operations, optimizing resource utilization, and exploring alternative energy sources where feasible. 

Additionally, businesses may need to consider strategic staff reductions to contain labor costs without compromising operational efficiency.

Furthermore, maintaining product quality amidst cost-cutting measures is imperative to uphold consumer satisfaction and market competitiveness.

However, there’s a risk that some businesses might compromise product quality to offset rising production expenses, potentially tarnishing their reputation in the long run.

Import substitution policies may face challenges as businesses opt for cheaper imports due to elevated domestic production costs. This could undermine efforts to promote local industries and contribute to trade imbalances.  

Government intervention is crucial in alleviating the burden imposed by the fuel tax hike on businesses.  Additionally, facilitating access to affordable financing for local manufacturers can help alleviate the strain of increased capital costs.

Reviewing tax laws that disproportionately impact production costs is paramount to fostering a conducive business environment. 

Tax incentives aimed at reducing the tax burden on businesses can stimulate investment and spur economic growth.

In light of these challenges, many businesses will have some disagreements with the tax administration which definitely require the need to explore alternative dispute resolution (ADR) mechanisms, particularly in tax disputes. 

In the realm of tax disputes, ADR stands as a beacon of efficiency and understanding.  ADR facilitates dialogue and collaboration between taxpayers and tax authorities, fostering a deeper understanding of each other’s perspectives and business operational needs to remain competitive. This enables parties to resolve conflicts swiftly and amicably, with the potential to address over 50 percent of disputes effectively, thus enabling taxpayers to improve trust in URA tax systems and taxpayer compliance.

Despite its benefits, recent challenges have emerged in the ADR landscape. ADR Regulations of 2023 mandating a narrow window for applying for ADR, coupled with the absence of ability to  freeze on the timeframe for accessing Tax Appeals Tribunals, present practical hurdles. These constraints are potentially hindering access to ADR, leading some parties to bypass it in favor of traditional litigation which increases cost of compliance. 

To address these challenges, policymakers may need to revisit ADR regulations, allowing for more flexible application timelines and implementing measures to freeze the time limit for accessing tax appeals tribunals during ADR proceedings. By enhancing accessibility and procedural fairness, ADR can realize its full potential as a cornerstone of efficient tax dispute resolution, improving tax compliance and growing the tax base.

Beyond cost savings, ADR fosters trust and cooperation between taxpayers and Uganda Revenue Authority (URA).

By providing a platform for direct engagement and collaborative problem-solving, ADR reduces the adversarial nature of disputes and promotes a culture of mutual respect and understanding. ADR represents a transformative approach to tax dispute resolution, offering a pathway towards efficiency, fairness, and trust building.

By embracing ADR, stakeholders can unlock the full potential of collaborative problem-solving, paving the way for a more harmonious and effective tax administration system.

CPA Silajji Kanyesigye Baguma, Managing Partner RKA & Co.