All Businesses Should Fulfil Their Tax Obligations-URA Defends EFRIS Amidst Backlash From Business Community

All Businesses Should Fulfil Their Tax Obligations-URA Defends EFRIS Amidst Backlash From Business Community

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By Spy Uganda

Kampala: The Commissioner General of the Uganda Revenue Authority (URA), John Musinguzi, has defended the implementation of the Electronic Fiscal Receipting and Invoicing System (EFRIS), emphasizing its critical role in addressing the country’s significant losses in uncollected Value Added Tax (VAT). Musinguzi stated that Uganda has been losing approximately Shillings 4 trillion annually due to inadequate monitoring of business transactions.

On June 10, 2024, Musinguzi addressed the Committee of Commissions, Statutory Authorities, and State Enterprises (COSASE) in response to queries from the December 2023 Auditor General’s report. He underscored the necessity of EFRIS to ensure all VAT taxpayers fulfil their obligations, revealing that only 32,000 taxpayers are currently registered for VAT despite the tax being in place for nearly 30 years.

“We estimate losing taxes in the range of Shillings  4 trillion due to our lack of capacity to monitor business transactions. Although Value Added Tax has been in place for close to 30 years, we only have 32,000 taxpayers on the VAT register. Businesses are supposed to voluntarily declare if they exceed the annual threshold of Shillings 150 million, but many underreport their earnings. This technology enables us to accurately track these transactions,” Musinguzi explained.

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The defense came in response to a question from Medard Sseggona (Busiro East), who criticized URA’s implementation of EFRIS for causing significant disruption within the business community, leading to a public standoff between President Museveni and traders in Kololo.

“I know you have been grappling with the issue of EFRIS, which has led to a significant standoff between URA and traders, causing national embarrassment,” Sseggona remarked. He queried whether the controversy stemmed from poor implementation methods, misunderstandings, or outright resistance to tax compliance.

In April 2024, traders in Kampala closed their shops in protest against EFRIS, with Godfrey Katongole, Chairman of the Kampala Arcades Association (KATA), citing failed discussions with the government. The traders demanded reduced import duties and fairer tax collection methods.

“We’re protesting against EFRIS, which is being imposed on us without proper understanding of how it works. We also want import duties reduced from 35% to 20%,” Katongole said.

Musinguzi attributed the standoff to the severe penalties initially associated with EFRIS enforcement, which have since been waived. URA has shifted focus to educating and sensitizing traders about the system, a strategy already yielding positive results among manufacturers and corporate companies.

“The penalties were quite high, at Shillings 6 million for non-compliance. This strict enforcement led to resistance. However, we have ceased issuing penalties and are now focusing on engagement and sensitization. Over the last month, we have halted enforcement operations and waived penalties for those who were still unfamiliar with EFRIS,” Musinguzi stated.

He added that the resistance to EFRIS is not unique to Uganda, noting similar challenges in Tanzania and Rwanda when they adopted the system.

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“We have observed similar resistance in Tanzania and Rwanda. However, as we continue to educate and engage with stakeholders, the benefits of the system become clear. EFRIS will eventually be extended to all VAT taxpayers,” Musinguzi concluded.

URA plans to extend EFRIS to all VAT taxpayers after the ongoing sensitization campaign with traders.

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