Museveni insists on taxes as traders agree to open shops

Museveni on Friday night met with traders leaders from Kampala and other districts at State House, Entebbe. The meeting focused on addressing the traders' concerns about current tax policies, which led to a recent shutdown of businesses in protest against these policies.

Thorny issues

President Museveni’s discussion with the traders centered on several key issues impacting the local business environment:

A high tax on textiles, calculated based on kilograms, which traders argue disproportionately affects their operations.
Concerns regarding manufacturers who engage in both wholesale and retail, which traders feel limits their ability to compete fairly.
Challenges with the Electronic Fiscal Receipting and Invoicing Solution (EFRIS). Traders claim that the system is unsuitable for many and has led to penalties for those unable to comply.
Requests to increase the threshold for Value Added Tax (VAT) from the current annual turnover of Shs 150 million to a higher figure to alleviate pressure on smaller businesses.

During the meeting, President Museveni challenged the traders with a nationalistic appeal, asking whether they wished to contribute to building Uganda's economy or continue to enhance other countries' markets at the expense of their own. He emphasized the need to retain capital within the country rather than allowing it to flow outward through imports.

In response to the concerns raised, the President requested additional time to consult with technocrats and conduct further research into the issues highlighted by the traders. A follow-up meeting has been scheduled for May 7, 2024, at Kololo Independence Grounds, where these topics will be discussed in greater detail.

In the interim, Museveni directed the Uganda Revenue Authority (URA) to halt the issuance of penalties related to EFRIS non-compliance and to refrain from recovering any penalties that had already been imposed. However, he made it clear that businesses must continue to fulfill their tax obligations as usual.

The President's remarks concluded on a positive note, acknowledging the traders’ agreement to reopen their shops while the government explores viable solutions to the issues presented.

This move is seen as a temporary reprieve in a broader effort to stabilize the business environment and foster more constructive dialogue between the government and the trading community.

This recent series of meetings comes after widespread discontent among traders over the EFRIS system, which they claim imposes high compliance costs and is difficult for many to understand, especially those not registered for VAT. Traders also hope for future discussions to consider significantly raising the VAT threshold and lowering the VAT rate to ease the fiscal burden on businesses.

The agreement to reopen shops marks a critical step towards normalizing economic activities in the country while awaiting more permanent solutions from the ongoing consultations.