Enforcement of EFRIS Affects 51% of Businesses: report

Among the affected businesses, 65.5% noted an increase in compliance and operational costs.

The enforcement of the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) by the Uganda Revenue Authority (URA) has significantly disrupted Uganda’s business environment, with 51% of surveyed enterprises reporting negative impacts.

This was revealed in the Uganda Business Climate Index for April to June 2024, published by the Economic Policy Research Centre (EPRC).

Among the affected businesses, 65.5% noted an increase in compliance and operational costs.

The report attributed this rise to the investments businesses must make to comply with EFRIS, including the acquisition of computers, software, reliable power sources, internet connectivity, printers, and hiring qualified accountants.

The burden is particularly heavy on small and medium enterprises (SMEs), which are now under increased pressure to adapt swiftly, given that failure to comply could result in penalties.

The report also highlighted that 34.5% of businesses saw a decline in sales and supplies.

This reduction is partially linked to a recent traders’ strike protesting what many traders viewed as unfair taxation policies, leading to the closure of shopping malls and arcades.

The strike significantly disrupted business activities, making it difficult for traders to access supplies and hurting sales during this period of upheaval.

In a broader context, the EPRC report outlined a decline in the overall business environment, with the Uganda Business Climate Index falling to 81% in the second quarter of 2024, down from the previous quarter.

The drop reflects what the report calls an "unfavourable business environment, reduced business optimism, and lower sales turnover."

The decline affected several key sectors. The manufacturing sector was hit the hardest, with a 13-point drop in business sentiment, bringing the index to 87.

Rising labour costs and fewer new business opportunities were cited as key reasons for this downturn.

The services sector also suffered, with a 5-point decline to 95, driven by escalating operational costs and decreased capacity utilization.

Meanwhile, the agriculture sector experienced a 3-point drop, bringing the index down to 79, as higher costs and lower turnover took their toll.

The report emphasized that the challenges brought about by EFRIS are not just limited to compliance costs but were exacerbated by the traders' strike, particularly in Kampala.

Many traders were unprepared for the digital tax system, perceiving EFRIS as an additional tax burden rather than a compliance tool.

Despite its intended goal of improving tax compliance and efficiency, the implementation of EFRIS has posed serious challenges for businesses across Uganda.

The combined effect of higher operational costs, disrupted sales, and a weakening business climate points to an urgent need for more business support and sensitization.

As Uganda continues to transition to this digital tax platform, addressing these concerns will be crucial for creating a more resilient business environment.