Avatar Technologies in line with IMF approach on taxation in developing countries

 

10 September 2015

The International Monetary Fund (IMF) encourages developing and emerging countries to implement ways of increasing their tax revenues, in order to support their development. The IMF’s Managing Director, Christine Lagarde, pointed out that in about half of all developing countries, tax ratios were below 15% of the GDP, compared with an average of 34% in OECD countries.

Mrs. Lagarde also stated that the implementation of “simple, broad-based and fair” tax systems could help improve these ratios. To achieve this, the IMF proposes to help countries mobilize domestic revenues to tackle poverty, among other issues, and to drive sustainable development, through Fund-supported programs.

Enabling emerging and developing countries to leverage their own resources ‒ more precisely their tax resources ‒ to finance development is at the core of Avatar Technologies’ activities. Avatar Technologies was created in 2011 by Global Voice Group (GVG). The company designs, develops and delivers solutions that create a tax compliance-enabling environment in emerging and developing countries.

Avatar’s flagship solution, Electronic Fiscal Declaration (EFD), optimizes tax compliance and collection, thus leading to an increase in the government’s tax revenue. By doing so, it provides the governments with the financial means to create development projects that match their needs and priorities.

As such, Avatar’s EFD solution falls in with the IMF’s approach to helping emerging and developing countries attain sustainable growth, with the advantage that it does not involve any external funding and thus promotes the countries’ financial autonomy.

Read the whole article: http://www.tax-news.com/news/IMF_Supports_Work_To_Broaden_Developing_States_Tax_Bases____68562.html

Three ways in which Avatar Technologies can help governments reach their development goals

 

14 August 2015

In the wake of the Third UN Financing for Development conference, held in Addis Ababa, Ethiopia on 13-16 July, the quest for innovative ways to allow governments to increase their revenue for development is taking center stage.

There is a clear consensus in favor of the reduction of the dependence to foreign aid, as the latter is actually not as efficient as it could be. In order to achieve the Millennium Goals in terms of financing for development, developing countries must leverage their own resources, specifically their respective tax systems. They also need to optimize governance at a national level and to enforce the policies – particularly the tax reforms – that will allow for the mobilization of the necessary financial resources.

In the light of the above, here are three ways in which Avatar Technologies, a parent company of Global Voice Group (GVG), can help governments create funds for development purposes:

1. By leveraging taxes as a source of finance for development. Avatar’s IT solutions enhance tax collection, thus increasing the government’s tax revenue.
2. By improving tax governance at a national level. Avatar helps governments optimize tax compliance.
3. By allowing governments to reduce their dependence on foreign aid. The increased tax revenue facilitated by Avatar’s solutions can be used to fund social development programs, while lessening the need for foreign aid.

Read the whole article: http://allafrica.com/stories/201507132830.html

 

Tackling tax leaks in Africa

 

27 July 2015

ICTs at the service of development: How Avatar Technologies fits into the World Bank’s anti-poverty plan. 

The fight against extreme poverty is on. Although progress has been made, a lot still remains to be done, for which substantial funds remain to be raised. It has become clear that emerging and developing countries cannot rely on foreign aid alone to help them out of poverty. The cruel irony is that these funds are available, just not to those who need it the most. They are drained from the developing world’s economies in the form of “dirty money”, or illicit financial flows.

The World Bank therefore urges countries worldwide to adopt a three-fold strategy to stem these illicit flows. Among others, this strategy highlights the significant role that effective tax collection plays in boosting the revenue of emerging and developing countries. It promotes the implementation of effective tax systems – especially in resource-rich countries, like the African ones –, the enforcement of regulations that will ensure that all assets are subjected to taxation and the creation of an automatic, cross-border tax information exchange system. The World Bank contributes to the fight against poverty by helping its clients in developing countries to improve their governance systems and to collect taxes.

Like the World Bank, Avatar Technologies is committed to empowering emerging and developing countries in their fight against tax evasion, especially in Africa. Every year, the continent’s governments see a staggering US$35.3 billion escape them through tax evasion and other illicit financial flows facilitated through tax havens.

Avatar’s cutting-edge tax compliance and collection optimization technologies fit right into the World Bank’s anti-poverty plan. They allow African governments to improve tax governance and transparency, and to plug tax leaks, by putting the relevant data within easy reach of the authorities.

For African countries, the resulting increase in tax revenue no doubt represents a much-needed source of funds that can be used to tackle poverty and other development issues, without having to resort to foreign aid.

Read the whole article: 
https://agenda.weforum.org/2015/02/3-ways-to-tackle-dirty-money-and-boost-development

 

Tanzania: Electronic Devices Boost VAT Collection

 

25 April 2013

TANZANIA Revenue Authority (TRA) has recorded an increase in Value Added Tax (VAT) under the use of Electronic Fiscal Devices (EFDs), it has been learnt.

The TRA Deputy Commissioner Domestic Revenue Department, Ms Generose Bateyunga, said that the authority recorded an increase of 23 and 9.6 per cent VAT in 2010/11 and 2011/12 financial years respectively. She made the revelation in Dar es Salaam yesterday at a one-day workshop to hotels and restaurant business people in the city on the use of EFDs and its importance. Introduced in July 2010 in the country to VAT registered operators, EFDs system will be officially be launched in May 15, this year, by the TRA Commissioner General. The system is expected to include VAT non-registered traders with sales amounting to 40,000m/- per year.

“After the official launch of devices, all traders will be required to register and use the devices as per EFDs regulations,” she said, adding that legal measures will be taken to traders who will not heed the policy.

Ms Bateyunga said that traders who will be spotted not using the EFDs without necessary reasons will be required to pay 3m/-.

“For those who will destroy the devices for the aim of evading taxes will pay twice the amount of taxes evaded or 4m/- plus the evaded taxes,” she noted.

 

FDs were introduced to VAT registered traders under the 2010 Value Added Tax (Electronic Fiscal Device) Regulation – Subsidiary Legislation, enshrined in the Finance Act 2010 and published on the Government Notice No 192 in May, 2010.

In another development, Ms Bateyunga called on customers to develop habits of demanding receipts in every purchase towards strengthening tax administration. The TRA Principal Officer, Mr Hamis Lupenja, said that the use of FDs help transmit tax information to TRA System automatically.

The system uses fiscal receipts/invoice which is unequally identifiable. “Apart from that, the system help built fiscal memory which cannot be erased by mechanical, chemical or electronic magnet interferences among other importance,” he said. He mentioned the devices as Electronic Tax Register (ETR), Electronic Fiscal Printer and Electronic (EFP) and Signature Device

Source: Tanzania Daily News (Dar es Salaam)

Global internet giants liable for VAT in SA

 

6 June 2013

JOHANNESBURG – Global internet companies that supply e-books, apps, music and other digital services in South Africa have become liable to register as value-added tax vendors in South Africa from June 1.
 
The implementation of the new regulations follows an announcement by former finance minister Pravin Gordhan in last year’s Budget and comes against the backdrop of international efforts to close tax leakages in the digital economy. Foreign suppliers of electronic services are now required to register for VAT in South Africa where the supplies of such services are made to residents of South Africa or payment is made from a South African bank account and the value of these supplies has exceeded R50 000. This will likely affect large internet groups such as eBay, Apple, Amazon and Google.
 
In the past South African individuals who bought electronic services from overseas were required to declare these purchases to the South African Revenue Service (Sars) and pay the VAT themselves, but because consumers were largely unaware of such requirements and it was difficult to police, the VAT generally went unpaid.
 
Gerard Soverall, head of indirect tax for PwC Gauteng, says the change is an effort to level the playing field between local and international suppliers. Up until June 1 foreign suppliers were able to sell electronic services to South African consumers without VAT being paid. However if the same item was bought from a local supplier it was subject to South African VAT.

“So our local suppliers were disadvantaged,” he says.

Soverall says there is a global trend towards ensuring that these types of supplies are taxed, especially where it is sold cross-border.

“What we are finding is that globally tax administrators are unhappy about the amount of tax they believe is being lost through internet type services.”

 

He says it is almost impossible to track and therefore local and international revenue authorities and national treasuries are working together to see how they can stop the leakage. While the actual loss to the local fiscus is largely unknown, Soverall estimates that it could amount to millions. Kyle Mandy, director and head of national tax technical at PwC, says with the growing digital economy the potential revenue loss is growing exponentially. But the implementation of the new regulations has not been without criticism and challenges.

 Charles de Wet, PwC head of indirect tax for Africa, says the international guidelines on VAT were published by the Organisation for Economic Co-operation and Development (OECD) earlier this year. One of the points is that domestic and international businesses should be treated the same.

“In this particular space we haven’t got it right at all because the threshold for a local business to register is R1 million whereas the threshold for a foreign business that supplies electronic services is R50 000. There is substantial difference as far as that is concerned.”

 

Soverall says one of the anomalies in terms of the administration of the new regulations in South Africa is that no distinction is made between Business-to-Business (B2B) and Business-to-Consumer (B2C) transactions. He says the pure technical view is that there shouldn’t be a distinction in taxation just because of the different status of the consumer. However, he believes it is an issue of “pragmatism”.

Many large B2B suppliers of electronic services are now being forced to register as VAT vendors in South Africa. This is despite the fact that there was already a provision in the law that allowed for the supply to be taxed. Soverall says there is also a concern that Sars is not really in a position to effectively police the regulations as most of the suppliers are situated overseas. Moreover, there are still some uncertainties around the exact definition of the services that are included, he says. There is a need to level the playing field and to simplify the system, but the current approach is leading to lots of difficulties for clients, he says.
 
De Wet says under the previous provisions Sars was only at risk of losing revenue where electronic services were sold to individuals, as consumers did not declare their purchases but the new regulations also introduce a risk of a “missing trader”.
 
In such instance the foreign company would register for VAT in South Africa, charge VAT but not pay it to Sars. If this happens the revenue authority would be worse off than it was before June 1 as the local business would have claimed the input VAT, but Sars would not have recovered the output VAT from the foreign business. In the previous dispensation it would have recovered the tax through the imported services provision.
 
However, a new agreement on compliance and cooperation that was signed by various revenue authorities could make it easier to police such issues.
 
 
Source: Money Web

Tanzania to broaden tax base through electronic receipts

 

1 May 2013

The Tanzanian government expects to collect 600 billion shillings ($370 million) a month after a new tax system expanding the use of electronic tax register (ETR) machines takes effect on May 15th. Currently, the government collects 400 billion shillings ($250 million) per month in taxes. ETR machines tabulate sales receipts at the close of each business day and electronically send that data to the Tanzania Revenue Authority (TRA) for an accurate tax assessment.

“Under the new system, businesses that earn anything from 14 million shillings ($8,600) to 40 million ($25,000) from now will have to use ETR machines,” said TRA Deputy Commissioner for Domestic Revenue Generose Bateyunga. Previously, these businesses could simply estimate their taxes.

 

Bateyunga told Sabahi that about 200,000 taxpayers have been avoiding paying taxes or underpaying, adding that aid from donors has been decreasing, therefore Tanzania must broaden its tax base to fund development. In 2010, when Tanzania introduced ETR machines, tax collection improved by 9.6% for the 2010-2011 fiscal year and 23% for 2011-2012. “We are implementing phase two, which will bring on board even more tax payers,” she said. 

TRA Director for Education and Taxpayer Services Richard Kayombo said the authority decided to roll out ETRs due to the difficulty of monitoring sales from manual receipts, as dishonest businesspersons have been under-declaring their sales or not issuing receipts at all.

“We are now embarking on the massive campaign for people to demand receipts for anything they buy. Even if it is a beer, a soda or a needle worth 10 shillings, get the receipt,” he told Sabahi. “We ask Tanzanians not just to demand receipts, but to make sure they are ETR receipts and they depict the correct amount paid.”

 

Kayombo said anyone who sells anything without issuing an ETR receipt will risk being fined 3 million shillings ($1,900) on the spot or twice the amount of the tax evaded, which may be more. TRA Commissioner General Harry Kitilya said that under this second phase, even petrol stations will now be required to issue ETR receipts.

“We have started a pilot project with Engen petrol stations to test our new ETR machines fixed to the pumps,” he told Sabahi. “From now on, when you lift the handle, the machine starts counting how much you have spent. When the handle is returned to the pump, it automatically issues the receipt.”

Under the new system, pumps cannot serve the next customer before issuing a receipt for the preceding customer, he said.

 

Kitilya said that depending on the success of the second phase, the TRA may implement the ETR system to all businesses nationwide to reduce complaints and increase efficiency. Potian Michael, owner of a welding company in Dar es Salaam, applauded the government’s decision to expand the use of ETR machines. Under the old system, he overpaid because the TRA over-estimated his sales, he said. AP Media and PR Consult Limited Managing Director Peter Keasi said broadening the tax base is a good idea, but voiced scepticism over the government’s ability to change people’s attitudes.

Tanzanians are not used to demanding a receipt when they purchase goods or services, he said, therefore the campaign to change that must be massive, and the government must ensure that ETR machines truly capture all the daily business activity on market streets.

 

 

Source: sabahi

Cashless payments in Kyrgyzstan

 

17 June 2015 

Promoting electronic transactions and IT fiscal solutions to reduce the informal economy in developing countries.

Developing countries are becoming increasingly aware of the potential of taxation when it comes to strengthening their economy and substantiating their national budget. The widening of the tax base and efficient tax administration are now high on these countries’ agenda for development. And not a minute too soon: estimations have shown that the revenue losses experienced by the governments of these countries due to tax fraud and the informal economy are staggering.

In Kyrgyzstan, for instance, the “shadow economy” deprived the country of US$6 billion since its independence in August 1991. It reached its maximum size between 1998 and 2011, at a shocking 58% of the GDP. Although it has decreased since then, to reach 48% in 2014, it still cost the national budget the equivalent of US$974 million that same year.

This prompted the government of Kyrgyzstan to adopt a program, during the first quarter of 2015, aiming to improve tax procedures for small and medium businesses. Consequently, several laws have been adopted to encourage not only businesses, but also individual consumers, to implement and use non-cash payment methods when selling or purchasing goods and services. Although the banking sector is developing at a steady pace, and the number of bank cards in circulation reached 908,908 at the end of 2014, only one consumer out of three currently makes non-cash payments in Kyrgyzstan (Source: http://www.timesca.com/news/15061-cashless-payments-to-reduce-shadow-economy-in-kyrgyzstan).

In order to be able to offer a cashless payment option, businesses will need to acquire electronic sales recording devices. The authorities will then have to monitor the use of these devices, if they are to gather the data they require to enforce tax compliance. Realizing the informal economy reduction plan initiated by the Kyrgyz government will require not only a unified state policy, but also relevant technologies. In order to facilitate the acquisition of such technologies, the Parliament has approved a number of changes to the tax regulations in place, to allow imported banking equipment for cashless payment to be exempt from VAT (Source: http://www.timesca.com/news/15061-cashless-payments-to-reduce-shadow-economy-in-kyrgyzstan).

Since this program relies heavily on tax incentives for the compliant businesses and on the consumers’ involvement, it is crucial to select the right technological solution. Ideally, this solution should help the tax authorities to create the right conditions to make tax compliance not only verifiable and controllable, but also more incentivising.

In this respect, the Avatar electronic fiscal solution is currently the most advanced and the most comprehensive on the market. It would allow the Kyrgyz government to include the consumers in its efforts to promote tax compliance. The involvement of the consumers in the compliance process is essential, as the number of receipts issued by the traders is greatly influenced by the number of these same receipts claimed by the customers. Thanks to its integrated fiscal lottery feature, Avatar’s EFD (Electronic Fiscal Device) solution would allow the authorities to considerably increase the number of claimed receipts and to involve the consumers in the tax compliance loop.

The key issue as far as the informal economy is concerned, whether in Kyrgyzstan or elsewhere, is the fiscal inclusion of the citizens. It must be encouraged and facilitated, not only through well thought-out laws and programs, but also through the implementation of adequate technological means.

 

Read the whole article: http://www.eng.24.kg/bigtiraj/175105-news24.html

TCS to modernise, automate taxation system in Zambia

 

29 July 2013

Tata Consultancy Services (TCS), India’s largest IT services provider, today announced that it has won a three year contract from the Zambia Revenue Authority (ZRA) for the modernisation of its domestic tax system. The financial details of the deals were not disclosed. This is TCS’ third revenue and tax system automation project in the African region after an implementation for Uganda Revenue Authority and ongoing implementation for Kenya Revenue Authority. The scope of the project includes providing an integrated tax software application based on TCS’ taxation framework, taxpayer 24/7 portal for e-services delivery, data migration, training, roll-out, warranty and operational support.

Tanmoy Chakrabarty, Vice President & Global Head, Government Industry Solutions Unit, TCS said, “The taxation project is all about service delivery transformation through a technology-led, service oriented approach. The new TCS tax framework will help Zambian government offer world class delivery of taxation services to its citizens as well as provide an effective monitoring system for its tax officials.”

Zambia Revenue Authority, as part of its tax reforms and modernisation programme, has engaged TCS to provide an integrated and multi-tax system covering VAT, Income Tax, Pay-As-You-Earn, Presumptive Tax, Turnover Tax, Mineral Royalty Tax, Excise, Property Transfer Tax, Medical Levy and Withholding Tax. Once operational, this system is expected to transform the service delivery to taxpayers, support the country’s sixth National Development Plan and assist ZRA to better control and monitor operations as well as prevent and detect potential revenue leakages. Further, the new system is also expected to bring about a higher degree of accountability and transparency to the public

For TCS this will be the 25th tax framework projecy globally, it has done more than 15 tax framework implementations in India, seven in USA and two in Africa. 

 

Source: Business Standard

Somalia: A new, dangerous job in Mogadishu: tax collector

 

July 29, 2013

MOGADISHU, Somalia (AP) — The Somali traders in Mogadishu’s markets have long faced down Islamist rebels and warlords demanding money. Now they say there is a new predator: the government tax man. Militias extorted cash from civilians during much of the last two decades of chaos. Now Mogadishu has a government in place, but shopkeepers view the taxman as the latest in a long line of troublemakers. That makes tax collection one of the riskier jobs in Mogadishu: Five tax collectors have been killed so far this year, following the killings of 10 last year, according to the director of Mogadishu’s municipal council, Abdullahi Artan.

“In some places, if you go without security escorts you’re going to take risks,” said Ali Haji, a tax collector. “Some of my colleagues were killed because of their work. Very many people don’t like our work.”

 

The idea of paying taxes for social services seems outlandish in a nation where few have seen functioning hospitals or schools. But if the Somali government is ever to wean itself off foreign aid and provide social services to its people, the taxman will have to persuade business leaders to pay their part. On a recent day in Mogadishu’s Hamarweyne market, the taxman was having a tough time. Sweating while carrying a plastic bag for cash deposits, he asked one shopkeeper after another to pay up. Many ignored him. But a soldier escorting the tax man threatened an immediate closure of the business if the tax was not paid.

“I haven’t earned any money since I came here in the morning, so I can’t pay,” one woman murmured as the tax collector walked away. Few willingly paid.

 

Between 2006 and 2011, Mogadishu was controlled by the Islamic extremist group al-Shabab, and business owners were forced to play by the rebels’ tax rules. Following al-Shabab’s ouster in August 2011, a fragile peace has fallen over the city, allowing new construction and business opportunities. Government tax collectors began work for the first time as tax evasion remains high.

“They consider me to be a bandit. They don’t want to get taxed,” said Mohamed Nor, another tax collector for Mogadishu’s municipal government, as he stacked bundles of money into a black plastic bag. Because it takes 2 million Somali shillings to equal $100, tax collectors have to carry around large bundles of bills. “Some are willing to pay, but you still have lawless lovers rejecting to pay it.”

 

One obstacle tax collectors face is philosophical: If it’s an established fact that government leaders in Somalia steal tax money, why should citizens pay? A report this month by the United Nations Monitoring Group on Somalia and Eritrea said that 80 percent of withdrawals from Somalia’s Central Bank are made for private purposes, indicating it is operating as a patronage system for members of government. It said that of $16.9 million transferred to the Central Bank last year, $12 million could not be accounted for.

“They just collect money that ends up in their pockets,” said Sahra Farah, a fuel trader, while looking at a taxman leaving the market.

 

The daily tax collections are not assessed based on a percentage of sales, but are merely payments toward an annual $135 business permit. That comes to about 25 cents a day, though traders say that price can rise to 40 cents a day, depending on how corrupt a given tax collector may be.

“The amount you pay depends on the tax collector of the day,” Mohamed Abukar said at his shop in Mogadishu. “Some shops pay fixed annual money, but some pay on daily basis. There’s no proper regulation.”

 

Artan, the director of the municipal council, said that some business owners buy forged business licenses to avoid paying the yearly $135 fee. “Taxing is really challenging here because some people don’t want law and order,” Artan said. The U.N. report this month looked at many of the ways progress in Somalia is held back by corruption, which the report said is “embedded in all layers of society.” Large-scale theft of government funds takes place at the Central Bank and Mogadishu’s port. The country’s nascent oil sector is at risk of corruption woes. Corruption is so pervasive that it will be difficult to stop, said Abdi Aynte, the director of a Mogadishu think tank called The Heritage Institute for Policy Studies. He said the government must institute an anti-corruption commission that has powers to investigate and must enact policies that encourage transparency and accountability.

“Corruption has become corrosive and part of the culture in this country,” Aynte said. “Citizens are unable to receive government services and even private services without bribing someone.”

 

 

Source: Associated Press, Nairobi, Kenya.

Rwanda: Govt to Tackle Traders Challenges

 

13 January 2014

Government pledged to continue facilitating private investors and eliminating existing barriers to trade, in a bid to propel the economy towards its targets in the second Economic Development and Poverty Reduction Strategy (EPRS2). This was agreed by several government officials who included among others, the Minister for Finance, Claver Gatete, and the Commissioner General of Rwanda Revenue Authority (RRA), Ben Kagarama, during an interactive conference with close to 50 traders in and around the country in Kigali. During the discussions on Friday, organised by the Ministry of Finance, and the Private Sector Federation, traders faulted government for failing to provide sufficient electricity necessary to run daily businesses.

“Insufficient electricity hampers the production capacity of several businesses. We have targets as well, but if the challenge of electricity is not addressed, we may not be able to achieve them,” James Nsengiyumva, a trader, said at the meeting.

 

In reaction, minister Gatete said although the country produces insufficient electricity, the government has a strategy to triple it through several production projects and importation.

“We need electricity now and yet its production takes time. The government decided to look into importation while it waits for its own production projects. The cost of electricity in Rwanda is over 20 cents per kilowatt hour and yet in some countries, for example Ethiopia, has only four cents per kilowatt hour. We can import power in the short run while we focus on producing in the long run,” Gatete said.

“The highway of electricity importation is, however, not yet compatible, meaning that even if there is cheaper electricity in Uganda and Kenya, there is no way of transporting it to here. The government, therefore, decided to prioritise the transmission links from Uganda, Kenya and other countries, in order to import electricity cheaply and faster,” he added.

 

The business fraternity also urged government to reduce the costs of new innovations like the electronic billing machines, meant to ease payment of taxes. The machines are supposed to be purchased by all taxpayers and cost up to $650 dollars, according to RRA.

“We embrace new innovations because they simplify work, but we are not comfortable with the price of the electronic billing machines. We know they help us to easily calculate VAT, but why must they be so expensive?” John Bosco Mugabe, a businessman in Kigali, asked.

 

The Commissioner General of RRA, Ben Kagarama, reiterated that the cost of the machines is high because the technology used to develop them was expensive. He, however, promised that the cost will drop once the machine providers have recovered their costs.

“The machine is unique and beneficial to both the taxpayer and to RRA. I have talked to the manufacturers and they said the price could drop by half in the near future. RRA will continue to be the interface between the traders and the suppliers but we should appreciate that they invested heavily in the new technology,” Kagarama said.

 

Government seeks to work closely with the private sector as it gears to achieve targets in the five year EPRDS2 agenda, which seeks to among others, create 200,000 jobs annually, as well as to raise GDP per capita from $644 to $1,200.
 
 
Source: allAfrica