How Uganda’s EFRIS Tax Reforms Disrupted Retail Loyalty Programs

The battle for customer loyalty in Uganda has taken a significant and unexpected turn. Traditionally, loyalty programs have been a crucial tool for retailers worldwide, fostering customer retention and driving sales. However, a surprising shift is unfolding in Uganda. Major retail chains such as Capital Shoppers and Quality Supermarket have suspended their loyalty programs, with only Carrefour actively promoting its MyCLUB digital loyalty rewards program. This unprecedented move is largely attributed to the introduction and enforcement of the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) by the Uganda Revenue Authority (URA) in 2021.

EFRIS, launched in 2019 as part of the Domestic Revenue Mobilization Program, aims to address tax administration challenges related to business transactions and the issuance of receipts. The solution records business transactions and shares the information with URA in real time. It involves the use of e-Invoicing through the URA web portal, direct communication with business transaction systems (system-to-system connection), electronic Fiscal Devices (EFDs), and Electronic Dispenser Controllers (EDCs) to manage the issuance of e-receipts and e-invoices.

While its recent strict enforcement has riled traders in most parts of Kampala city, the solution has already disrupted the operational dynamics of supermarket loyalty programs since 2021.

William Kakuru, Manager of Capital Shoppers supermarket in Ntinda, explains that the URA’s stringent monitoring through EFRIS has necessitated the halting of loyalty voucher issuance. Kakuru elaborates, “The current URA system does not support the integration of discounts and loyalty vouchers with regular purchases. We cannot use the system and have a separate one for vouchers and loyalty points. Integrating something not accommodated by the URA system would require creating an entirely separate payment system, which we hope URA is considering.” The suspension of loyalty vouchers has led to customer dissatisfaction with the abrupt change, hoping for a prompt resolution from the tax authority.

The operational challenges of integrating loyalty programs with EFRIS have been widespread. Kenneth Obbo from Quality Supermarket in Naalya confirms the suspension of their loyalty voucher system due to compliance complexities with the new tax regulations. Similarly, an administrator at Frain Supermarket in Ntinda reveals that their loyalty program has been affected by the incompatibility between their Star Financials system and the Right Books system, which does not support loyalty programs.

Isaac, the administrator at Frain Supermarket, notes the adverse impact on their business, pointing out that the suspension of loyalty programs has disrupted customer expectations. “Previously, customers could accumulate points and redeem them for goods, a benefit now temporarily withdrawn due to the limitations imposed by the EFRIS system.”

As news of the loyalty program suspensions spreads, customer discontent grows, despite many being unaware of the underlying regulatory changes. The impact on customer loyalty, crucial for the success of supermarkets, is evident, with businesses reporting a decline in customer satisfaction and loyalty.

Supermarket managers are hopeful that the URA will recognize the implications of the loyalty program suspension on customer satisfaction and loyalty. Kakuru suggests that a separate payment system compatible with URA’s requirements might be a viable solution. Until such measures are implemented, the loyalty landscape in Uganda’s supermarkets remains uncertain, with retailers and customers alike eagerly awaiting a resolution.

The intersection of tax reforms and customer loyalty initiatives in Uganda’s supermarkets has created a unique conundrum. As the global battle for customer loyalty intensifies, the suspension of loyalty programs in Uganda highlights the complexities that arise when regulatory changes disrupt established business practices. Supermarkets, once at the forefront of securing customer loyalty through innovative programs, now face the challenge of aligning with tax regulations while maintaining customer satisfaction. The resolution of this issue will undoubtedly shape the future of loyalty programs in Uganda’s supermarket industry.

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