Mr John Walugembe, the executive director of the Federation of Small and Medium Enterprises Uganda (FSME) has urged Uganda Revenue Authority to work with other stakeholders to put in place mechanisms that will assist businesses to recover.

For the last four years, Innocent Byarugaba runs two restaurants as registered businesses and pays trading licences to Kampala Capital City Authority (KCCA). He says he cannot formally pay taxes now due to the pandemic that caused a drop in sales, forcing him to lay off eight workers out of 12. His daily income is still slow, prices of raw materials are still inflated and the returns are low.

Byarugaba is a restaurant owner in Makindye division, Kampala. “Every day, I invest Shs20,000, which brings in Shs180,000. With that, I pay off daily wages for the workers, and keep Shs20,000. The money to pay rent comes from another side income. So you will find that you can’t pay taxes.”

Byarugaba’s views represent several business people in the informal sector that do not meet their tax obligations due to limited information and cash flow problems. Due to the pandemic, many businesses collapsed while others are struggling to pick up.

Walugembe believes there are no direct benefits linked with formalising businesses in this country. They are just inferred so URA should put in place benefits with other government agencies to attract SMEs to formalise business.

“This could be positioned in terms of a scoring system in public procurement processes, as part of the endeavours to encourage businesses to formalise. There has to be a link between requests to formalise and the benefits that come through like financing or business offers.” Currently, there is nothing substantive about formalisation.