Boosting development through improved tax collection
22 February 2016
How Avatar Technologies’ solutions can help developing countries become tax administration leaders and take charge of their development.
Tax collection is an important variable in the complex socio-economic development equation. The more efficient and comprehensive it is, the more likely the equation is to reach the expected result, which is sustainable development for emerging and developing countries. However, if insufficient or obsolete, the result will be less than satisfactory.
The Zimbabwe Revenue Authority, ZIMRA, has clearly understood this. Between 2006 and 2015, Zimbabwe has collected more taxes than any other country in the region. This result makes the authority the top African performer in terms of tax collection and administration. However, ZIMRA is not quite ready to rest on its laurels yet. It is aware that it needs to expand its tax base and to address issues such as capital flight, tax evasion and avoidance and the informal economy.
Optimizing the tax administration is part of Zimbabwe’s plan to mobilize its national resources. This plan aims to generate additional revenue in order to finance the country’s needs in terms of development. A committee specifically established to work on the resource mobilization issue has already implemented some “innovative measures”, such as the introduction of different types of tax on a variety of economic activities within the informal sector.
In order for this measure to yield the expected result, i.e. the broadening of the tax base, all the transactions will need to be accurately recorded, which often does not happen in the informal trade. It must be highlighted that in Zimbabwe, the informal economy accounts for 90% of the employment. That is why the authority is currently implementing a new tax management system based on the introduction of electronic “fiscal registers”. The purpose of these registers is to record financial transactions and to ensure that taxes such as VAT are efficiently collected.
Avatar Technologies’ (Avatar) flagship product, the Electronic Fiscal Declaration (EFD) solution, would be of valuable assistance to developing and emerging countries that wish to strengthen their tax administration to support development, following the Zimbabwean example. Avatar’s EFD solution is a comprehensive and real-time tax collection system that registers every single sale electronically via electronic sales-recording devices. The system therefore makes it impossible to suppress the records or to evade taxes and contributes to widening the countries’ tax base.
But what makes it unique is that it offers advantages not only to the government, but also to the traders and the consumers. The latter are automatically entered into a prize draw when they makes a point of requesting their sales receipt and stand to win very attractive prizes. As for the former, they are given access to a variety of free value-added services that will help them enhance their business.
Furthermore, the increase in tax revenue that would result from the implementation of the solution could also be channelled into the priority development projects of the beneficiary countries. This means that, in addition to helping emerging and developing countries emulate the Zimbabwean example, Avatar’s technology will act as a powerful enabler for development.