Zimra could double VAT collection through automation

28 November 2016

The Zimbabwe Revenue Authority (Zimra) is plagued by revenue leakages due mainly to the fact that their systems are not fully automated. A recent United Nations Capital Development Fund (UNCDF) study has shown that the digitisation of VAT could significantly increase revenues. The current Zimra board has therefore been mandated to accelerate automation. The UNCDF report stated that the transition from cash to electronic payments could provide the way to a broader range of financial services.

Willia Bonyongwe, Zimra’s chairperson, said in an interview that the impact of automation or digitisation of payments would be most marked on VAT. [The impact of automation] “is 17% from the first quarter and we expect it to be double that at the end of this month. If we continue with this momentum, then by year end, we could double our VAT on local sales. We have leakages because of using semi-automated systems and we, indeed, need full automation to plug the serious revenue leakages we are facing as emerging markets,” she said. “The first thing is to agree with the UN report that, as Zimbabwe, we are lagging behind some of our counterparts in many respects.”

The advantages of automation were already demonstrated when the tax management system was implemented. Many tax evaders were caught in the net, including those who did not pay PAYE (Pay As You Earn) and VAT.

The UNCDF is running an awareness campaign under the “Better Than Cash Alliance” banner as an attempt to increase the digitisation of payment systems, especially in emerging countries. Electronic payments save costs and provide transparency for governments, developmental organisations and stakeholders in the private sector. The digitisation of payments could also accelerate economic modernisation.

Avatar Technologies offers an Electronic Revenue Assurance (ERA) solution which has been specifically designed to address tax compliance issues successfully in both developed and developing countries. This ERA solution can effectively support the tax system of emerging countries.

While tax compliance is a worldwide issue, it is particularly problematic in emerging countries, where the difference between the tax (VAT) due to the State and the amount actually collected is 50% to 60%, compared with 7% to 13% in developed countries. In Africa alone, an estimated USD 50 billion is lost each year due to fraud and tax avoidance. Governments must be at the forefront of modernisation initiatives to develop the necessary capacities in their countries, because they are losing out on a huge amount of revenue as a result of tax evasion.

There is major scope to increase Zimbabwe’s tax base—as the introduction of electronic systems can simplify, and boost efficiency in, the collection of tax payments. Simple and efficient, Avatar’s solution is much more than a tax management system, as it provides the governments of countries that adopt it with an innovative financing mechanism enabling them to secure much-needed funds for development, while compensating for dwindling foreign aid and avoiding additional dependence on foreign debt. The real-time invoicing which Avatar Technologies can make possible in Zimbabwe could be a real boon for the government. It allows for more effective monitoring and makes fraud and evasion more difficult, as transaction data transmitted in real time is harder to manipulate and/or delete (anti-zapping capacities). Furthermore, already-existing devices and Smartphones can be seamlessly integrated into the solution.

The electronic invoicing solution Avatar Technologies provides would standardise and simplify internal processes, close major tax loopholes and improve collection procedures.

Digital payment systems drive growth in emerging countries

20 October 2016

Digital payment systems can drive sustainable growth in emerging countries. Many emerging countries are grappling with the challenge of how to modernise their economies, improve transparency, advance financial inclusion and, most of all, drive sustainable growth. One country that has achieved very strong results through its digital payment initiatives is Tanzania.

By digitising the payments made to the government by businesses and people, Tanzania has already:

• empowered its tourism sector, by reducing, by over 40%, economic leakage from cash payments such as entrance fees for conservation parks, thus supporting investment and employment in the process
• cut inefficiencies, including the reduction of customs clearance times for imports from nine days to less than one day
• increased transparency between citizens and the government by digitising tax payments, which provides electronic proofs of payment and protects people against fraud.

Tanzania’s results in driving the transition from cash to digital payments are very impressive. “The country has developed significant experience that has enabled it to achieve revenue gains at double digit rates while also delivering social benefits for its citizens,” said Dr Ruth Goodwin-Groen, Managing Director of the Better Than Cash Alliance—a global partnership of governments, companies and international organisations that aims to accelerate the shift from cash to digital payments in order to drive inclusive growth and reduce poverty.

Other countries in the region have put in place initiatives to digitise payments and, while many are in the early stages of their transition, the benefits are quickly being realised and becoming evident:

• Kenya is targeting to double tax collections over the next three years through its electronic tax filing system iTax.
• In Uganda, the Kampala City Authority’s automated tax collection system boosted revenue by 167% in a single year.
• Rwanda drove by nearly 80% the adoption of electronic VAT payments by SMMEs.

Another way in which the governments of emerging countries can boost tax revenues is through an electronic fiscal system. Avatar Technologies offers the only Electronic Revenue Assurance (ERA) solution which has been specifically designed to address tax compliance issues. This ERA solution can effectively support the tax systems of emerging countries. It is Cloud-based and highly secure and works in real-time to create an environment that promotes tax compliance. In this way, it benefits both taxpayers and governments.

The ERA solution is simple and affordable. It promotes fairness and transparency, thus supporting the World Bank’s three pillars of reform:

• simpler and cheaper
• fair
• transparent

 Already-existing devices and Smartphones can be seamlessly integrated into the solution and the ERA devices are robust and have a high level of autonomy. This means they allow for both remote audit and activation, and, as such, can be used in businesses which are located in remote areas.

The Avatar solution provides the governments of countries that have adopted it with an Innovative Financing mechanism enabling them to secure funds for development, while compensating for dwindling foreign aid and avoiding additional dependence on foreign debt.

 The real-time electronic invoicing—also called e-invoicing— which Avatar Technologies can make possible could be a real boon for the government. In addition, to encourage tax compliance, several African countries have embarked on innovative initiatives such as receipt-based fiscal lotteries. While obtaining a receipt for any legal transaction does not cost the consumer anything extra, it becomes valuable as it serves as lottery ticket. In this way, transactions are more likely to be part of the official (not the shadow) economy and VAT can be collected by the tax authorities. For the tax authority, the cost of administering the lottery and of paying the related prizes is, in turn, far outweighed by the extra revenue of an increased tax base and the citizen-policing effect of detecting VAT-dodging businesses. 

Specific steps that countries can take to increase their fiscal space include:

• strengthening tax audits
• simplifying tax systems
• increasing the focus on larger taxpayers
• modernising collections.

 The electronic fiscal solution Avatar Technologies can provide would standardise and simplify internal processes, close major tax loopholes and improve collection procedures. Given the tremendous funding needs to meet the continent’s development goals and the scope to raise revenues from a diversity of sources, Avatar’s ERA solution represents a major opportunity for African countries. The time to boost revenues through digital payment systems is now.

Avatar Technologies can increase revenue in Botswana

25 August 2016

Tax compliance is a worldwide issue but it is particularly problematic in emerging countries, where the difference between the tax (VAT) due to the State and what is actually collected is as much as 50% to 60%, compared with 7% to 13% in developed countries. In Africa alone, an estimated USD 50 billion is lost each year due to fraud and tax avoidance.

Of all the challenges Botswana has had to face in the past decade, tax collection has been one of the most difficult. The Africa Capacity Report (ACR) for 2015 reveals that in 2012, Botswana collected direct and indirect tax amounting to USD 4.45 billion (47.9 billion pula) and was ranked 18th out of 45 countries.

The Commissioner-General of Botswana’s tax agency, the Botswana Unified Revenue Service (BURS), has acknowledged that it is still not able to collect the optimum tax and customs revenues that could potentially be collected. The Commissioner said that the BURS faced the following constraints:

• the lack of capacity to undertake more enforcement activities to cover the whole of Botswana
• public ignorance of the importance of tax—which causes low compliance levels
• the lack of an enterprise risk management function for increased collection efficiency

The ACR report states: “Tax performance in African countries leaves much to be desired, tax systems are still inefficient, costly and significant amounts of revenue are lost to tax exemptions and tax avoidance.” The report suggested that investing in the capacity of revenue authorities must be part of a broader fiscal reform agenda that includes simplifying and rationalising tax systems. Staff must be better trained, retained with the right financial incentives, and allowed to work free of political interference. Revenue authorities must also build the capacity to engage with taxpayers and foster a culture of compliance where taxation is seen as contributing to essential services. This means that governments must be transparent and efficient about their expenditures—citizens must be aware of what services they are getting in return for their tax contributions. Governments must invest in tax awareness and education campaigns.

According to the most recent data for 2012, illicit financial flows from Africa were higher than the money flowing into the country through remittances (USD 82.5 billion versus USD 51.4 billion). This is a significant difference. Despite the global financial crisis, remittance flows have continued to increase (with the exception of 2009) and have been higher than Official Development Assistance (ODA).

Mobilising domestic resources and curbing illicit financial flows will be key to structural economic transformation, growth and the reduction of poverty. Governments must be at the forefront of initiatives to develop the necessary capacities in their countries, because they are losing a huge amount of revenue which could be employed to put in place modern and progressive tax systems and to finance socio-economic development projects.

There is considerable scope to enlarge Botswana’s tax base—as the introduction of electronic systems can simplify and boost efficiency in the collection of tax payments.

Avatar Technologies offers an Electronic Revenue Assurance (ERA) solution which has been specifically designed to address tax compliance issues successfully in both developed and developing countries. This ERA solution can effectively support the tax system of emerging countries. It is Cloud-based, highly secure, and works in real-time to create an environment that promotes tax compliance. In this way, it benefits both taxpayers and governments. The real-time invoicing which Avatar Technologies can make possible could be a real boon for the Botswana government. It allows for more effective monitoring and makes fraud and evasion more difficult as transaction data transmitted in real time is harder to manipulate and/or delete (anti-zapping capacities).

To encourage tax compliance, several African countries have embarked on innovative initiatives such as receipt-based fiscal lotteries. While obtaining a receipt for any legal transaction does not cost the consumer anything extra, it becomes valuable as it serves as lottery ticket. In this way, transactions are more likely to be part of the official (not the shadow) economy and VAT can be collected by the tax authorities. For the tax authority, the cost of administering the lottery and of paying for the corresponding prizes is, in turn, far outweighed by the extra revenue of an increased tax base and by the citizen-policing effect of detecting VAT-dodging businesses.

The electronic fiscal solution Avatar Technologies can provide would standardise and simplify internal processes, close major tax loopholes, and improve collection procedures. Given the tremendous funding needs to meet Africa’s development goals and the scope to raise revenues from a diversity of sources, Avatar’s ERA solution represents a major opportunity for Botswana—there is no better time than now to optimise tax collection in the country.

E-Invoicing recovers lost revenue

 29 July 2016

It is essential for many developping countries to increase their domestic revenue, hence the need for greater mobilization of revenue. The recent economic and financial crisis demonstrated the extreme weakness of the African economies, in particular that of the Republic of Guinea, and for many years now, we have noticed a drastic decline of the foreign aid coming from the Western world. For Guinea, it highlights the need to mobilize its own

The Guinean Republic could rely on bars, restaurants, hotels, dance halls and other recreational venues to boost a significant flow of funds. However, for some years now, the Guinean National Tourism Office has been having difficulties in carrying out tax collection on the services provided by leisure venues.

The E-Invoicing solution developed by Avatar Technologies could be of great value for Guinea, by helping the country to better regulate tax compliance in this sector. Avatar Technologies’ approach would optimize the tax collection and compliance, thus allowing the country to accumulate millions of dollars which could be used to finance its development projects.

Read full article.

Burundi’s Revenue Authority should increase and optimise tax collection

21 July 2016

Tax issues are high on the agenda of African governments. In many of the poorest countries in sub-Saharan Africa, a campaign is being waged to achieve efficient collection and administration of domestic tax revenues. Burundi is one of those countries.

Taxation is never popular, but it is a necessity for national development and a functioning democracy. Burundi receives substantial support from international donors, but the global economic situation is very turbulent. Most donor countries are cutting back on domestic and overseas development expenditure. In fact, domestic sources of revenue are the only reliable and unrestricted source of state income for Burundi and must be maximised. How can this be done?

Avatar Technologies can contribute to increasing the revenues received by the Burundian State for national development by optimising the revenues received from VAT, reducing the costs of collection and limiting tax evasion. Avatar could be a real partner of choice in supporting the good work of the Burundian Revenue Office.

There is major scope to enlarge Burundi’s tax base, as the introduction of electronic systems can simplify and boost efficiency in the collection of tax payments.

Avatar Technologies offers the only electronic fiscal solution (EFD) which has been specifically designed to address tax compliance issues successfully in both developed and developing countries. This EFD solution can effectively support the tax system of emerging countries. It is Cloud-based, highly secure and works in real-time to create an environment that promotes tax compliance. In this way, it benefits both taxpayers and governments.

The EFD solution is simple and affordable. It promotes fairness and transparency, thus supporting the World Bank’s three pillars of reform:

• simpler and cheaper
• fair
• transparent

Already-existing devices and Smartphones can be seamlessly integrated into the solution and the EFD devices are robust and have a high level of autonomy. This means they allow for both remote audit and activation and, as such, can be used in businesses which are located in remote areas.

The real-time invoicing which Avatar Technologies makes possible could be a real boon for the Burundian government. It allows for more effective monitoring and makes fraud and evasion more difficult as transaction data transmitted in real-time is harder to manipulate and/or delete (anti-zapping capacities).

The introduction of electronic systems can simplify, and boost the efficiency of, the collection of tax payments in Burundi. Much more than a tax management system, the Avatar solution provides the government of countries that adopt it with an innovative financing mechanism enabling them to secure funds for development while compensating for dwindling foreign aid and avoiding additional dependence on external debt.

 

Reduce tax evasion for economic growth in Guinea

 

8 July 2016

Tax evasion is one of the major scourges responsible for the impoverishment of the African continent and illegal outgoing monetary flows slow development in Africa down, especially in Guinea. According to experts, increasing the tax base would be an important solution in order to end this crisis, and in this regard, Avatar Technologies can offer Guinea the necessary tools to ensure effective tax management. Through the reliability of its IT system, they are able to meet the tax collection needs of the country, and its solution allows the authorities to improve tax and sales declaration, and to increase the rate of tax collection, all at a reduced cost for the fiscal administration.

 

Thanks to the EFD solution from Avatar Technologies, the Guinean government would be able to manage their fiscal flows in real time. It will involve services that would without a doubt replenish the Guinean State’s coffers. With the help of Avatar Technologies, Guinea can jumpstart their sustained economic growth through the effective tax management of its resources, which will allow the country to achieve financial independence.

 

Read the original article.

 

A new way to catch the informal market in the tax net

24 June 2016

In the struggle to increase revenue, African governments are seeking new ways to catch their informal economies in the tax net. This is not surprising as the informal sector contributes about 55 % of sub-Saharan Africa’s GDP and 80% of the labour force. The informal economy is often associated with increasing poverty and weak employment conditions. By investing through informal channels, African entrepreneurs seek to reduce the costs related to wages, retirement pensions and other social benefits. Beyond poverty and social issues, the prevalence of informal activities is closely related to an environment characterised by weaknesses in three areas: taxation, regulation and private property rights. A transition to electronic tax collection is a way to achieve better control over taxation. Governments struggle to collect sales tax because merchants and purchases still use cash (informal economy) and outdated technology with high risks of fraud and there is a lack of access to real-time transaction data or reliable information systems.

Sales and transactions subjected to taxes are not declared or under-declared and there is no incentive to tax compliance. Authorities rely on time-consuming, costly and ineffective paper-based processes to verify and enforce tax compliance. And then there is the informal market where no taxes are paid at all. Clearly there is a need to widen the tax base by formalising the informal market.

The tax-collection solution Avatar Technologies can provide consists of a tax data ecosystem in the Cloud, controlled by the relevant government authorities and powered in real time by electronic transaction-recording devices. This solution stands out from previously implemented electronic tax collection systems implemented in some countries to control sales-generated taxes. The real-time transmission of all transaction data brings far-reaching benefits:

• very high reliability of data
• integrated high capacity
• high visibility and transparency for government
• fast processing
• user-friendly program
• the prevention of fraudulent suppression and/or manipulation of transaction data
• the prevention of loss of data due, inter alia, to network outages, hardware failures—very different from other systems that rely solely on off-line devices with data stored locally in a built-in fiscal memory
• supporting governments to “go digital” while providing the information systems necessary to understand and predict economic health

African governments cannot afford to lag behind in the digital revolution. They must acquire the technology to enable them to capture all new sources of taxable income. The benefits this will bring in increased tax revenue will far outweigh the costs.

 In the new electronic tax collection solution, a fiscal lottery can be linked to the system—an innovative and integrated way to create buy-in from the participants. Customers are encouraged by the prospects of winning a prize in the lottery to reclaim their tax receipt from the service provider because the receipt number is used for the lottery. It doesn’t cost them anything extra but provides them with an incentive for tax compliance. This, secure revenue stream for the government could be ploughed into sustainable development. Any costs for supplying the prizes are also by far outweighed by the increase in tax revenues. In an indirect way too, the customers, by requesting their receipts force the sales provider to be compliant.

In this way, the informal market can be brought into the tax net and motivated to comply with government tax regimes.  

E-invoicing – a sustainable solution to ensure VAT collection

07 June 2016

The Togolese Revenue Office (OTR) announced that it is continuing its reforms to combat fraud in all its forms. As part of this campaign, the standardised invoice was introduced to the Imports Commission [Commissariat des Impôts] and zero tolerance was announced for invoicing in any other format. The stated objective was to render the business climate more competitive and reassuring for all business operators whether they be in Togo or in the sub-Region.

According to Esso-Wavana Adoyi the Imports Commissioner of the Togolese Revenue Office, the main point of the exercise is that its use will permit better collection of VAT and allow disputes to be resolved between a business and its client, for example, after the purchase of a product. The standardised invoice is also the way to oblige companies to submit the VAT levied on goods and services to the government.

While the standardised invoice may improve invoicing matters in Togo, the only real way to reduce tax evasion, the cost of tax collection and simplify the management and monitoring of tax to be paid is through e-invoicing. Paper invoices cost a lot to administer and it is easy to commit fraud when they are used. E-invoicing, however, is real-time invoicing and would put a stop to all these fraudulent activities in Togo as well as making life easier for the Regulatory Authorities.

Tax compliance is a worldwide issue but it is particularly problematic in developing and emerging countries where the difference between the tax (VAT) due to the State and what is actually collected is 50% to 60%, compared with 7% to 13% in developed countries. In Africa alone, an estimated US$50 billion is lost each year due to fraud and tax avoidance. Governments must be at the forefront of initiatives to develop the necessary capacities in their countries because, as a result of this, governments are missing out on a huge amount or revenue which could be employed to:

• put in place modern and progressive tax systems
• finance development projects

 The real-time electronic invoicing—also called e-invoicing— which Avatar Technologies can make possible could be a real boon for the government of Togo. To encourage tax compliance, it is also possible to embark on innovative initiatives such as receipt-based fiscal lotteries, as several African countries have done.

While obtaining a receipt for any legal transaction does not cost the consumer anything extra, it becomes valuable as it serves as lottery ticket. In this way, transactions are more likely to be part of the official (not the shadow) economy and VAT can be collected by the tax authorities. For the tax authority, the cost of paying lottery prizes and administering it is, in turn, far outweighed by the extra revenue of an increased tax base and by the citizen-policing effect of detecting VAT-dodging businesses.

The electronic fiscal solution Avatar Technologies can provide for the Togo government would standardise and simplify internal processes, close major VAT loopholes and improve collection procedures. Avatar’s EFD solution represents a major opportunity for Togo. Togo can plug its leaking revenues and put a stop to fraudulent activities right now through e-invoicing.