The Ugandan government is losing approximately 4 trillion shillings each year due to uncollected Value Added Tax (VAT). John Musinguzi, the Commissioner General of the Uganda Revenue Authority (URA), highlighted this significant issue, attributing the losses to the lack of capacity to effectively monitor business transactions.
Musinguzi explained that Uganda has had VAT for nearly 30 years. Despite this, only 32,000 taxpayers are registered for VAT, which requires businesses earning over 150 million shillings annually to declare their earnings voluntarily. Many businesses, however, claim to earn below this threshold, making it difficult for the URA to identify and monitor them without advanced technology.
Speaking before the Committee of Commissions, Statutory Authorities and State Enterprises (COSASE) on June 10, 2024, Musinguzi defended the implementation of the Electronic Fiscal Receipting and Invoicing System (EFRIS). He emphasized the necessity of this system in accurately tracking business transactions to ensure proper tax collection.
His remarks were in response to a question from Medard Sseggona, a representative from Busiro East. Sseggona asked about the negative impact of EFRIS on the business community, including a significant standoff between traders and the government that embarrassed President Museveni during an incident at Kololo.
Sseggona noted the difficulties faced by URA in implementing EFRIS, which led to conflicts with traders at major collection points. Musinguzi acknowledged the challenges but stressed that such resistance is not unique to Uganda. Similar opposition occurred in Tanzania and Rwanda when they first adopted EFRIS.
Musinguzi assured that after traders adapt to EFRIS, the system will be extended to all VAT taxpayers in Uganda. He pointed out that countries in the East African Community, including Tanzania, Rwanda, and Kenya, experienced initial resistance to EFRIS. Over time, however, businesses understood the benefits of the system for both themselves and the government.
“We have observed the trends in countries using this technology. Tanzania has used it for over 19 years, Rwanda for more than 10 years, and Kenya also faced initial resistance. As we continue to explain and engage with stakeholders, they will come to see that this system is beneficial,” Musinguzi added.
The implementation of EFRIS is part of URA’s efforts to improve tax collection and reduce the substantial losses from uncollected VAT, ultimately benefiting the country’s economy and governance.
