To Efris or not to Efris...

In recent weeks, there has been and continues to be resistance against one of the revenue mobilisation tools - the Electronic Fiscal Receipting and Invoicing Solution (EFRIS).  

EFRIS was introduced in 2021 to support both traders and Uganda Revenue Authority (URA) in the reconciliation of the Value Added Tax (VAT) returns.

What I hear from the traders is a mixture of enthusiastic misinformation, in some instances total lack of information and utter defiance for no reason ably linked to Efris. All this could be traced back to the lukewarm job done by the government in tax education amongst traders. 

If driving cars needs permits based on skills, why should the trading license just be about collecting money? We need to annually orient traders on tax matters and give them certificates. In this way we collect money from the licence but also refresh traders on the changes in the tax landscape.

To the trader, here are some facts. When you decide to trade in Uganda, by law you are a withholding agent for indirect taxes like VAT and Excise duty. This means that some of the money you collect is not yours and must be remitted to URA.

But also, as a legal trading entity, with a trading license, you must pay tax from income (after adjusting for costs) made by your business. 

In the collection of tax URA employs several tools to support and induce tax compliance. Efris is one such tool designed to support VAT reconciliation for traders with gross turnover above Shs150 million.

The equation is about how much money as a trader you remit to URA as withheld VAT. On one side, you have incurred a VAT charge on stock and as such in a negative position worth the value in VAT (18 percent) of the vatable stock. 

For this side of the equation to work better, traders need to ask for EFRIS fiscal device receipts from suppliers. This will help them claim this money back on the other side of the equation. The other side of the equation is VAT collected by the trader on sales.

As a withholding agent for VAT, the trader should remit the money to URA. But before paying to URA, it must be adjusted for what the trader paid out as VAT on stock. Many traders have traditionally included the collected VAT as part of their profit, and this is a part reason for calling Efris a “tax”.

The difference between the VAT that was paid out and what has been collected brings out three scenarios.

One, if the trader has paid out more money as VAT than they have collected, they are in a negative VAT position (often settled in the next period filling).

Two, if the trader has collected more money as VAT than they paid out, then they must remit the difference to URA. The third scenario is when the VAT paid out equals VAT received, and no VAT obligation. For the equation to work all traders must participate (use EFRIS), voluntarily or not.

So where do we go from here? First, URA must devise better and inclusive means of tax education. The URA should establish a center of excellence to train traders in tax compliance (and its benefits) and give certificates to the traders who complete the training course and link it to the trading license. 

Secondly, the government must clean the marketplace imperfections relating to information asymmetry, market stall allocation disorganization, local administration challenges and trade in stolen items. 

Lastly and most importantly, the Office of the Prime Minister (OPM), as the leader of government business should pick up the mantle for highlighting the accomplishments of the government after utilisation of taxpayers’ money with clear punitive action to corrupt use of taxpayers funds. 

As citizens, we need to be able to pay our taxes but also demand accountability with no fear of reprimand by the state. The social tax contract between citizens and the state can only be improved through vigorous tax education and accountability for mobilized revenues.

David Walakira is the Executive Director at the Center for Budget and Tax Policy, an economist and fiscal policy analyst.