Explaining VAT, EFRIS in Numbers
The Public Lens
Electronic Fiscal Receipting and Invoicing Solution (EFRIS) is a new system that entails the use of Electronic Fiscal Devices (EFDs), e-Invoicing, or direct communication with business transaction systems to manage the issuance of e-receipts and e-invoices in accordance with the Tax Procedures Code Act 2014.
Once a transaction is initiated using any of the solution’s components, transaction details are transmitted to Uganda Revenue Authority (URA) in real time to generate e-receipts and e-invoices.
What really happens is that when a sale is made, transactional details are captured in the seller’s invoicing system (ERP) or point of sale, encrypted and transmitted to URA in real time to generate e-receipts and e-invoices. This works best for clients with sales systems (both existing and new).
At the manufacturer’s level when a retailer goes to the manufacturer to buy for instance a 50kg bag of sugar, the manufacturer issues an EFRIS to the retailer with an 18% Value-added tax (VAT). If the bag is UGX 200,000 UGX-factory price, then the retailer is getting it out at UGX 236000. Already this means an additional UGX 720 per kg which brings the Kg to UGX 4720 i.e. 236000/50. This tax of 720 per kg charged by the manufacturer has to be remitted to URA.
Once the Goods are at the retailer’s place, for the purpose of catering for operational costs and a profit margin, he can for instance choose to add a margin of UGX 200 per kg which brings the selling price at 4920 i.e. 4720+200.
Impact of EFRIS to the final consumer is that the retailer as in our example above now sells to him and issues an EFRIS with an 18% tax as well. The final consumer is receiving a Kg at UGX UGX 5806 i.e. 4920×1.18. This means the retailer has received a tax per kg of UGX 885.6 i.e. 4920×0.18. The tax has to be remitted to URA.
However it is also important to remember that besides this VAT, there is income tax. Both the retailer and the manufacturer, irrespective of charging and remitting VAT, they earn a profit. URA again needs 30% of the net profits (before tax) made.
Tax burden to the consumer is that for example if the consumer is a salary earner, they have their income already charged a PAYEE and then for every withdraw from bank or mobile money charged and now every purchase of a good or a service is charged a VAT.
However, EFRIS is good in that it eases tax assessment for the tax man and since many businesses were operating under a zero tax liability this system allows for more inclusive taxation. Many retailers have not been into the act of filing returns nor government knowing about their existence.
It is also now good in that everyone (retailer, consumer) will feel the burden of taxation; everyone will have ground to demand for accountability of our taxes from government.
Accountants will find also LOE jobs/utility while supporting entities to work on their books of accounting. We need to see accounting firms open up.
The main outstanding disadvantage with the system is that unit price of goods will increase because the retailer has to add 18% on food, water, ice cream, chocolate, Iphone, cloths, fuel. This will increase the cost of living but governance reforms and value for money for public expenditures will improve.
The possible risk likely to be born with this system is high crime rate due to increased cost of living. This will spur from the desire to sustain life from those not able to earn a living.
There is also a likelihood of a trade stand still due to misconceptions and misinformation leading to low sales.
Also arising from low affordability of hiked goods business closure may result. Also likely to happen is the Inability to offset operational costs by business men with the overall outcome of slower economic growth until a point of eq
