By NELSON NATURINDA

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The dispute between the Uganda Revenue Authority and the traders in Kampala has been forwarded to President Yoweri Museveni after a two-day strike that paralysed Kampala city and other major towns of Uagnda such as Masaka, 120km southwest of the country’s capital.

The traders’ disagreement with the Uganda Revenue Authority is the taxman’s attempt to impose the electronic fiscal receipting and invoicing solution (EFRIS), which recovers the value-added tax and the traders are calling it ‘daunting” in a period of slow business activity.

The traders complain that manufacturing firms sell products at wholesale and retail prices in business centers which creates unfair competition.

They also cite high interest rates that have made doing business costly; high import duties on clothing and other related goods and inflationary pressures that have made most household items expensive for the general public to purchase, hence slowing the business environment.

Read: Uganda traders in a fix over tight rules on China imports

The high cost of borrowing has also reduced returns in most of the commercial real estate.

The Bank of Uganda reports that the average rate of bank lending on the market is 18 percent, but traders contend that, particularly for their type of business, which does not require operational bureaucracies, they obtain bank lending rates that are 30 to 35 percent or higher.

The traders argue that VAT is collected from factories and cannot be applied to the retail shops again, but URA says VAT is levied throughout the entire value-added chain to prevent tax gaps, and that the tax body is merely attempting to collect the tax from the final customer who is not reselling the goods.

Uganda charges 18 percent VAT, which is fully paid at the time the product is being imported or when it leaves the factory. After that, the tax collector gradually gathers the charge from the minor value additions made by traders until the final customer eventually pays it off.

“If you deduct it at the factory and you don’t follow that trail, you don’t recover this 18 percent from traders, and that’s what these business people don’t know. The VAT is paid off by the final consumer. We can’t skip the traders because we will be losing the flow somewhere along the way, and this is how VAT works the world over until you recover it from the final consumer,” John Musinguzi, the URA Commissioner General said.

Read: Uganda proposes new taxes on key products

It is available to companies that deal in taxable supplies of a gross turnover that’s over Ush150 million, but traders say this is exploitation.
According to URA data, only 600 of the more than 40,000 traders in the Kampala city business hub have implemented the EFRIS technology.

With its revenue target of Shs30 trillion ($792m), URA is working feverishly to collect each tax it can and the taxman says arrears of up to Ush390b ($102 million) for the 2022/23 financial year, is primarily VAT, yet it was the country’s second-largest source of revenue after direct taxes, generating Ush9.3 trillion ($2.3 billion) a couple of years back.

The tax collectors brought in Ush25 trillion ($6 billion) in revenue over the 2022/23 fiscal year. But the national Treasury now demands an additional Ush5 trillion, before the close of this financial year, two about two months away.