The Ugandan government unveiled the Electronic Fiscal Receipting and Invoicing Solution (EFRIS), a new electronic tax collection system, in 2020, designed to manage and track invoices and revenues in order to improve value-added tax (VAT) collection. After starting with major firms, the Uganda Revenue Authority (URA) began enforcing the system on small and medium-sized businesses (SMME) in April 2024.
SMMEs started expressing their displeasure with authorities prior to the online system's enforcement starting. Days after the system went live, tensions finally came to a climax. Traders took to Kampala's streets in protest, shutting down all commercial activity in the nation's capital
The week-long shutdown was initiated by the Federation of Uganda Traders Association (FUTA). Inspired by the courage of Kampala traders, protests quickly spread to other parts of the nation.
"We have called on all businesses in the country to close in protest until the government hears our voice," FUTA President John Kabanda
"We are pressing ahead with the strike and we are determined to close for even a month untill the government acts on our demands"
Following a reduction in development aid to the nation, when the World Bank withdrew its support for the country on August 8, 2023, due to the country's anti-homosexuality laws. That when Ugandan Revenue Authority (URA) shifted its attention to traders and the enforcement of VAT laws. Traders who violate the law may be fined up to Sh6 million (US$1,575). Traders however argue that the 18% value added tax (VAT) is already having a devastating impact on them.
Uganda informal economy
Uganda collects less than 14% of its GDP in taxes, which indicates a narrow tax base. Sub-Saharan African nations average 18%. Untaxed and informal activity makes up a sizable portion of the economy.
Over three-quarters of all tax money is contributed by the top 1,000 taxpayers in the nation. The majority of Ugandans work in the informal economy, and the government has not established effective methods for obtaining their taxes.
More than half of the GDP and more than 80% of jobs are in the informal economy. Merely the presumptive tax is paid by small and medium-sized enterprises, constituting less than 0.05% of total tax collections.
In reaction to the week-long business shut down, President Yoweri Museveni ordered a halt to the controversy. At the State House in Entebbe, Museveni held a meeting with a group of sixty-one people, led by Kampala City Traders Association (KACITA) leader, Musoke Nagenda, and FUTA chairman, John Kabanda.
After speaking with the President, traders have decided to stop the business shutdown - State House
Museveni told the traders during the discussion that he would be meeting with representatives from the URA and the Ministry of Finance, Planning, and Economic Development to examine the issue further.
On May 7, more talks regarding the controversial tax changes are scheduled. The window of time between now and May 7 is intended to facilitate the switchover for all traders who need extra time to get used to it, while enabling those who have already done so to carry trading uninterrupted.