Why EFRIS cant work in Kampala’s Downtown Traders
Kampala’s bustling downtown area, affectionately known as Kikuubo and its surrounding fort of commerce, is a vibrant hub of trade and exchange in Uganda. However, amidst the cacophony of transactions and negotiations, implementing the Electronic Fiscal Receipting and Invoicing System (EFRIS) poses significant challenges. Here’s why the tax system faces hurdles in this unique marketplace:
1. Dynamic Pricing Dynamics:
In downtown Kampala, prices are not fixed but rather fluid, fluctuating according to the perceived identity and purchasing power of the buyer. A shirt priced at 30,000 Ugandan shillings could fetch double or even triple that amount from a seemingly affluent customer. This fluid pricing model, driven by market forces and negotiation tactics, undermines the standardized invoicing required by EFRIS.
2. Middlemen and Unpredictable Transactions:
The downtown area is rife with middlemen who facilitate transactions between buyers and sellers. These intermediaries, who often do not own the shops they operate from, play a pivotal role in the marketplace’s ecosystem. However, their involvement complicates the implementation of EFRIS, as transactions occur at unpredictable prices and locations, making it challenging to track and record sales accurately.
3. Resistance to Additional Costs:
Many downtown merchants rely on razor-thin profit margins to sustain their businesses. Imposing an additional 18% Value Added Tax (VAT) through EFRIS could significantly impact their bottom line. Moreover, the practice of negotiating prices and then adding taxes later dissuades customers from making purchases, further eroding the potential for compliance with the tax system.
4. Limited Understanding and Education:
A significant portion of downtown merchants lack formal education and may struggle to grasp the complexities of EFRIS and taxation systems. Meanwhile, educated individuals who understand the intricacies of the tax system often find themselves unemployed or residing in rural areas, far removed from the urban marketplace where EFRIS is intended to be implemented.
5. Incompatibility with Informal Trade Practices:
EFRIS is designed to work seamlessly with businesses that stock inventory and issue formal receipts. However, many downtown traders operate informally, selling goods without owning stock or maintaining proper records. This informal nature of trade poses a fundamental challenge to the effective implementation of EFRIS.
In conclusion, while EFRIS aims to modernize and streamline tax collection in Uganda, its implementation in downtown Kampala faces formidable obstacles. Addressing these challenges will require a nuanced approach that considers the unique dynamics of the marketplace and seeks to balance taxation with the realities of informal trade and economic survival.
