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OPINION

By Moses Byaruhanga

On Tuesday, May 7, President Yoweri Museveni had a meeting with the traders at Kololo Independence Grounds. This followed the meeting the President held on April 19, at State House Entebbe with the leaders of various traders’ associations.

The traders raised their concerns that included: the use of EFRIS system affecting them in many ways such as the cost of the gadget, its need for constant power and Internet, using it was complicated, non-compliance attracted sh6m penalty for a single entry, the taxation of fabrics/textiles by the kilogramme instead of the cost of the goods plus manufacturers who end up wholesaling and retailing their goods.

Others included issues like how the system recognises goods sold on credit. During question time, a lady said she stocked some toilet seats and some got broken. “How does the system recognise such?” she asked.

Some were concerned about incidents when a trader has cleared their goods and paid taxes as assessed, but as one goes to offload their goods, a team of enforcement officers comes claiming that the taxes paid on the goods were less than what they should be and then demand that they go back to URA for another assessment.

On this, they were wondering whether each assessment officer has their own figures and why URA does not have standard figures.

The traders had also complained that there were too many taxes and also asked the Government to raise the VAT threshold from the current sh150m to about sh1b.

They also alleged that the Government favours foreign investors who are given free land in industrial parks. The traders also preferred paying tax once, which would be a sales tax instead of VAT.

The President responded telling the traders that they should be patriotic and do things that help their country grow. Some of these included changing from importing to manufacturing and services because, this way, they would be creating jobs in Uganda.

He gave an example that in the case of cotton, the first level of jobs was the garden (the farmer), then the second ginning, the third weaving, the fourth tailoring, the fifth dyeing (colouring the cloth), the sixth tailoring and the last set of jobs were those of loading and transporting and the ones created at the shops.

The last two were similar to the ones the traders create when they import fabrics, but the other six levels were jobs left in the countries where the fabrics were imported from.

The President gave them an example that Uganda consumes 250 million metres of fabrics and Nytil which employs 2,500 people produces 25 million metres of fabrics which is 10% of Uganda’s consumption. That we need 10 Nytils to certify the Ugandan market and if we had them, then that sector would be employing 25,000 people. On top of that, the jobs which the traders create when they import fabrics; the ones in the shops, drivers, loaders, etc would still remain. But when we import fabrics the 25,000 jobs above are donated to the countries from where we import fabrics.

Furthermore, Uganda was spending $880m on the importation of textiles annually which was almost the same amount of money we earn from the export of coffee, which is now bringing in $950m.

The President added that traders who were willing to transform into manufacturing could also be given free land and other incentives that are given to investors. He said it was not true that Ugandan investors were not accessing free government land in industrial parks as it had been alleged by some leaders.

He said that in Namanve industrial park, 70% of the land had been allocated to Ugandan investors who also enjoyed other incentives like tax holidays, etc. He read out some names of Ugandans who were allocated land in Namanve.

He advised the traders that if some of them went into manufacturing, not only would they save their country the haemorrhage of using the forex we earn from exports to import what we can make ourselves, but the local manufacturers would also need traders to sell their goods, hence, the trading jobs would still remain.

Furthermore, local manufacturing will create jobs and the Government would collect more revenue from the manufacturing sector. He added that the Government had also created a fund under UDB to give credit to manufacturers at 12% with a reasonable grace period. He said that if the money wasn’t enough the Government would increase it. On a fund to support importers, he said that wasn’t a good idea as it would be developing the countries where we import from.

On the issue of too many taxes, the President told that traders that they were complaining about imports; where there was import duty, VAT and withholding tax. He added that there were areas like exports where there wasn’t a single tax. Others were agriculture locally, and that when a trader buys from a local manufacturer, they were not required to pay import duty and withholding tax. In such a scenario the trader would only pay VAT. He further explained that even on imports, there were areas like importation of machinery, intermediary goods and medicines which don’t attract import duty.

On the use of the EFRIS machine and the cost of the machine, he said he had been taken through how it is used and it wasn’t difficult to use. He added that URA officials had told him there was an alternative of using the smartphone which only required buying a printer at about sh150,000.

He asked URA officials to explain these issues to the traders and noted that part of the problem was that government officials don’t explain well the policies that they implement.

On other issues related to the use of EFRIS like selling on credit, goods returned or goods getting spoilt while in stock, etc, the President asked the leaders of the traders to meet with URA and the ministry of finance officials and find a solution to the challenges brought forward by the traders.

He promised that after ironing out the challenges on the use of the EFRIS system which also included what happens when the Internet and power were off, he would be willing to meet the traders on June 20. During this period, the penalties would remain suspended as they were being reviewed.

The President asked one of his staff to follow up a case where some traders had been harassed on penalties in a period he had suspended them following the State House meeting with traders’ leaders.

On standardisation, the President asked URA why that was a problem. URA responded that they were currently carrying out research on the prices of the goods that were commonly imported. They added that they were only remaining with electronics.

On VAT versus sales tax, the President asked the ministry of finance officials to explain the difference between the two.

Moses Kaggwa explained that VAT was paid along the market chain and at the end of the day it was borne by the final consumer. He said that through VAT, the Government collects more revenue than if it were sales tax paid once.

From my observation, some of the underlying issues on the use of EFRIS system are to do with income tax. Through the system all the sales of an entity are known by URA.

So, when filing returns, you cannot lie to URA when it comes to the sales. Secondly, its common knowledge that some of the landlords in town who own the commercial buildings were not genuine.

It is said that when a tenant pays rent of about sh2m, the landlord gives them a receipt for about sh300,000. This way, the landlord underdeclares rental income to URA.

On the other hand, if a person who has paid sh2m as rent, but was given a receipt of sh300,000, now that URA is being aggressive, which rent will they declare to URA. If they use sh300,000, that will appear as if their profits were higher, hence, be required to pay more income tax. It is also said that some of the landlords were the ones telling the tenants to close the shops.

The writer is a senior presidential advisor/political affairs, State House