Why businesses are fighting e-receipting, invoicing system

Recently, there have been persistent calls by various business associations, mainly, Kampala Capital City Traders Association (Kacita) and Federation of Uganda Traders Association (FUTA) to carry out strikes over what they term as “kutulugunyizibwa” about how EFRIS enforcement is being handled. 

EFRIS (Electronic Fiscal Reporting and Invoicing System) is a data-centric digital solution that facilitates automatic transfer of billing information between the business and URA. The transactions are transmitted to URA in real-time, and the said data is used to generate electronic receipts and invoices. 

EFRIS has multiple benefits for both government and the businesses. For government, it cost effectively mitigates against tax evasion by those who do not register under different tax heads yet they are eligible to; those who under-declare their sales; those who don’t remit the VAT they’ve charged; those who engage in trade mis-invoicing, false VAT refund claims, etc. EFRIS data also helps to improve the collection of income tax and PAYE as it strengthens compliance checks on self-assessments made by the taxpayers.

EFRIS was legally introduced in 2018, and government made it mandatory for all VAT-registered taxpayers to use EFRIS with effect from July 1, 2020. It is imperative to note that while Value Added Tax (VAT) collections were Shs2,992.92 billion at the end of the financial year 2020/2021, the following year, they rose to Shs3,295.90 billion and further rose to Shs448.58 billion in 2022/2023. Relatively, in the same period, the taxpayer register has risen from 1,596,116 to 3,500,294 taxpayers. This performance is phenomenal, to say the least. 

To put the “business community’s defiance” of EFRIS in perspective, some businesses would innocently start and operate without analysing and computing tax components of their ventures. Some enterprises have been deliberately evading tax. With EFRIS, the innocent parties think it’s a new tax, whereas not. The tax evaders are furious because, through EFRIS, URA is closing in on them. This is simply the reason why taxpayers are fighting EFRIS. But it’s fight that will end in vain.

At the inception of EFRIS, some supermarkets, namely, Capital Shoppers, Quality, kenjoy, Jazz and Mega Standard ran to court in protest. Justice Musa Ssekaana rightly dismissed their application stating that courts should be slow in granting injunctions against government projects which are meant for the interest of the public as against the private proprietary interest of a few individuals. The gains demonstrated by the statistics aforementioned make EFRIS unstoppable as it is in public interest. 

Otherwise, to a taxpayer willing to be tax compliant, EFRIS contributes to equitable tax paying, eases pre-filing of tax returns, and eliminates the safety risks and costs associated with physical documents; their VAT refund claims are fast-tracked given that all the required information is readily available and verifiable; it allows for better traceability and security in commercial transactions.

The URA’s taxpayer compliance model is to the effect that for taxpayers trying to comply, they are assisted; those who don’t want to comply are deterred and those who are putting in effort not to comply, URA uses the full force of the law. The cost for non-compliance is high. A taxpayer who is eligible but fails to issue an e-receipt/invoice or employ a fiscal device or forges an e-receipt is liable to a fine of an amount not exceeding Shs30million or imprisonment not exceeding 10 years or both upon conviction. 

To the business persons who for long enjoyed profits without paying taxes, and who are now being ushered into the era of profit after paying tax, this is a new irreversible reality. The era of lack of tax planning and non-compliance is bygone. The current times unquestionably demand a swift adaptation to tax efficiency planning and compliance, as lack of either can easily turn into assessments, penalties, interest and criminal prosecution, sadly reversing any financial and reputation gains previously made.
 
The author, Mr Allan Atwiine  is a lawyer and tax consultant. 
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