At exactly 5pm on April 19, 2024, a selection of 61 traders, part of more than 200 that had camped for seven hours at State House Entebbe, were KAMPALA. At exactly 5pm on April 19, 2024, a selection of 61 traders, part of more than 200 that had camped for seven hours at State House Entebbe, were ushered into a closed-door meeting with President Museveni and a few other government officials.
The tense meeting, which lasted until 11 pm, followed a one-week sit-down strike by traders from various associations over unresolved multiple grievances. Key on their agenda was unfair levying of the Value Added Tax (VAT), the forcible enforcement of the Electronic Fiscal Receipting and Invoicing System (EFRIS) by the Uganda Revenue Authority (URA), the $3 (Shs10,388.2) and $3.5 (12,119.5) per kilo Import Duty on fabrics and garments, the non-refunding of the six percent Withholding Tax, and Chinese operating retail shops in downtown Kampala.
The team included traders, leaders and some members of the Kampala City Traders Association (KACITA), Federation of Uganda Traders Associations (FUTA), United Arcades Traders and Entrepreneurs Association (UATEA), and Uganda Dealers in Used Clothes and Shoes. The traders informed President Museveni that charging them VAT was unfair and insisted it should be charged on the factories. Sources who attended the meeting said the President, who ordered an immediate suspension of the implementation of EFRIS, agreed with the traders on VAT and promised to look into the issues and meet them again in June.
The subsequent meeting held on May 7, 2024, fell short of the traders’ expectations, forcing them to launch another sit-down strike on July 30. But this time, Prime Minister Robinah Nabbanja calmed them in a record two days. A year later, the traders have, in a space of less than three months, launched two strikes over the same issue. The August 28 to 29 strike was contained by Ms Nabbanja. But yesterday, the premier, despite touring downtown Kampala, that was ravaged by torrential rain and floods last Friday, was tight-lipped on the issue of the trader’s strike.
Unending issues
As was in previous strikes, the traders who had circulated a notice about a month ago, announcing the strike, fronted the per kilo tax policy on garments; foreigners, especially Chinese operating retail businesses; high taxes; high rent; and the coercive enforcement of EFRIS, and added the issue of landlords increasing rent fees by 10 percent annually.
Taxes
The traders accused the government of running a different tax policy from that of other East African countries, despite subscribing to the same common market. The traders demand the immediate removal of the $2.55 (Shs8,829.94) per kilo tax on fabrics and garments and replace the old per invoice charge. The traders argued that per kilo tax violates the General Agreement on Tariffs and Trade (GATT) valuation. GATT is used under the World Trade Organisation (WTO), where Uganda is a member. This per kilo tax policy was rejected outright by the traders when the government hiked the import duty for textiles from 25 percent to 35 percent or $5 (Shs17,313.6).
Before the URA kicked off its implementation on July 1, 2020, the former KACITA chairperson Thaddeus Musoke Nagenda, on February 25, 2020, petitioned Finance minister Matia Kasaija, asking the government to repeal the National Textiles Taxation Policy, which gives URA powers to levy $5 per kilo on import duty as opposed to the known per invoice charge, a specific tax mechanism used in calculation of VAT, goods and Service Tax and Withholding Tax.
The government instead pushed its implementation date to December 31 and later started implementing it, which led to the strikes. Mr Kasaija later wrote to URA Commissioner General James Musinguzi asking him to halt the tax policy’s implementation following the public outcry. The policy was later reduced to $3.5 per kilo and implemented, leading to more strikes untill last year when it was reduced to the current $2.5.
Another contention is the way URA levies the 18 percent VAT from the wholesaler to the final user, yet it would be charged once at the factory. Dr Musoke argues that all the people in the transaction chain, including the importer/manufacturer, wholesaler, retailer, and final consumers, pay VAT, although URA says it is passed on to the final consumer. ‘By principle, his VAT payable is Output VAT minus VAT input from the importer/manufacturer. Which, in simple calculation, happens to be similar to charging 18 percent VAT on the profit,’ he said.
URA, Mr Nagenda argues, would collect Shs23.9m VAT out of the products worth Shs100m, from the four individuals. Another tax issue the traders raised is the six percent Withholding Tax, which Agents claimed URA takes and does not pay them back at the end of the year as required by law. Speaking to traders in August, Ms Nabbanja promised to present their issues before the Cabinet since all their arguments require change in the taxation laws. But the traders told reporters yesterday that nothing has since been done.
Trade chain violation
The influx of so-called Chinese investors operating shops downtown is another issue traders want addressed immediately. They say the Chinese have ended up in open competition with the local players through opening both distribution, wholesale, and retail shops besides hawking in all upcountry areas.
Experts weigh in
Mr Richard Ssempala, an economist and a lecturer at Makerere University School of Economics, linked the recurring traders’ strikes to the poor relationship between the traders and the tax body. Relatedly, Dr Fred Muhumuza, a policy analyst, also said the government should intensify dialogue with traders and tax education to resolve disputes before they escalate into strikes.