C-News Bureau Chief
KAMPALA – In a landmark meeting on April 16th, 2024, key Ugandan ministers, including Matia Kasaija, Minister of Finance, Planning and Economic Development, convened with trader representatives to address pressing economic issues impacting the nation’s trade environment.
During the discussions, traders raised critical concerns over current economic policies, suggesting major reforms to enhance Uganda’s market competitiveness and streamline taxation processes. The proposed reforms include a significant increase in the VAT threshold and reductions in VAT rates, which traders believe could alleviate financial pressures and stimulate economic activity.
The key issues discussed included a variety of critical economic concerns:
VAT Adjustments: Traders advocated for raising the VAT threshold from UGX 150 million to UGX 1 billion and reducing the VAT rate from 18% to 16%. They argued that such changes would lessen the tax burden on businesses, potentially leading to increased investment and consumer spending.
Challenges with EFRIS: The Electronic Fiscal Receipting and Invoicing System (EFRIS) was another focal point, with traders expressing difficulties related to its complexity and the costs associated with compliance. In response, the Uganda Revenue Authority (URA) pledged to enhance support and education for users, aiming to improve understanding and compliance among traders.
Import Duty Concerns: Discussions also highlighted the high import duties on textiles and garments, which traders claim disadvantage Ugandan prices compared to neighboring countries like Kenya and Tanzania.
Call for Standardized Valuation Guidelines: The non-standardized valuation guidelines for imported goods were criticized for creating uncertainty and inconsistency in tax liabilities. Traders recommended adopting more uniform valuation methods aligned with international standards.
Anti-Competition Practices: Concerns were voiced over foreign manufacturers undercutting local businesses by directly engaging in retail, which is seen as contrary to fair competition practices.
Regional Trade Competitiveness: Traders indicated that Uganda’s high taxation rates have made its market less attractive compared to East African neighbors, leading to a decrease in regional trade hub status.
Government Responses and Agreements:
The Ministry of Finance committed to reviewing and potentially revising the VAT policies based on extensive consultations and studies to be conducted shortly.
The URA will focus on taxpayer education and moderate the enforcement of penalties under EFRIS to allow businesses time to adjust to the system.
New regulations under the recently enacted Competition Law are being finalized to curb anti-competitive practices and ensure fair trading conditions.
Analysis:
This meeting underscores a critical juncture for Uganda’s trade policies. The government’s openness to dialogue and potential policy adjustments signal a positive step towards addressing the structural issues in the economy. However, the effectiveness of these proposed changes will depend heavily on their implementation and the government’s ability to balance tax revenue needs with the growth requirements of the private sector.
As the government proceeds with its consultations, the economic landscape of Uganda hangs in the balance, awaiting decisive actions that could pave the way for a more prosperous trading environment. The outcomes of these discussions are eagerly anticipated by both local and international observers, as they could dictate the future trajectory of Uganda’s economic stability and regional trade relations.
This analytical report seeks to offer a comprehensive overview of the issues discussed during the recent trade meeting and the potential implications for Uganda’s economic policies and regional trade dynamics.
