Kenya: KRA change tact to nab stamp duty and ETR tax cheats


Kenya: KRA change tact to nab stamp duty and ETR tax cheats


22 April 2013

The taxman has issued new excise duty stamps starting this month as one of the measures to curb increasing tax evasion.

The Kenya Revenue Authority said that counterfeit stamps have become common, costing it significant amounts in revenue loss. It has yet to quantify revenues lost annually through counterfeit stamps though. Commissioner General John Njiraini said it is developing a ‘track-and-trace’ back-end system to support field surveillance of stamps usage.

“The system will be able to tell the difference between fake and genuine stamps with almost 100 per cent certainty…. The issue of counterfeit stamps is quite prevalent but we will now follow up to get the real culprits,” he said.


A team of 50 staff will be dispatched to monitor the market on ground and using the system, and will be increased to 300 within three years. KRA said domestic excise duty collection is also under-performing owing to a shift in consumption patterns for beer and cigarettes.

“Consumption of beer and cigarettes is moving from brands with higher tax rates to brands with lower or zero tax rates, such as Keg,” Njiraini said.

He said the agency will install a production-line technology to eliminate under-declaration, initially roping-in cigarette manufacturers. Beer makers will then be targeted and eventually the whole drinks and beverages industry, including bottled water. Implementation of the first two phases of the new excise tax management system will be complete before end of May.


KRA has also noted discrepancies in VAT performance, with collections from large taxpayers rising only by 0.6 per cent to Sh35.7 billion in the nine months to March. The medium and small taxpayers segment recorded a 26.1 per cent growth in VAT in the same period.

“We are investigating several incidences of invoice trafficking for the purpose of supporting VAT input claims. One case is complete and we will be moving to court shortly,” said Njiraini.


KRA will start tracking ETR machines remotely to get real time data on VAT from points of sale. Monitoring ETRs is at present manual, creating loopholes for tax evasion.

“We expect to have all ETR devices GPRS-enabled within the 2013/14 financial year,” he said.

Njiraini also hopes Parliament will “give priority” to enacting the pending VAT Bill whose delay he said is costing KRA about Sh11 billion, besides fuelling a build-up in VAT refund claims.

KRA is also interlinking its new system for handling electronic declarations for domestic taxes, dubbed iTax, with 20 banks for the start. It hopes to interlink with all banks by July.

“We are discussing how to ensure rapid uptake of the system by taxpayers… there is no reason why some taxpayers file returns manually,” he said, hinting at making use of the system mandatory.


The iTax system has the capability for electronic payment, eliminating the need for taxpayers going to Times Tower to remit.


Source: The Star, Kenya

Countries worldwide crack down on tax evasion


Countries worldwide crack down on tax evasion


8 July 2015

The Avatar fiscal lottery takes the gamble out of VAT collection and compliance.

There is currently a global interest in the potential of fiscal lotteries to curb tax evasion and to increase governments’ tax revenue. Fiscal lotteries aim to curb informal business-to-consumer transactions by encouraging consumers to claim their sales receipt. The incentive is that this receipt doubles up as a lottery ticket, giving its holder a chance to win a prize.  

Various countries in different regions of the world have implemented a fiscal lottery program to optimize VAT compliance and collection. Malta, for instance, was the first European State to introduce such a program, as early as 1997. Recent figures published by the National Statistics Office show that thanks to the fiscal lottery, the Maltese government’s total VAT revenue increased by 12.7% from January to May 2014 compared to the same period in 2013.

Following a few unsuccessful attempts at enforcing VAT compliance, Greece decided to tackle its massive VAT evasion problem through a fiscal lottery. By that time, the VAT evasion rate had reached a whopping 30%. The Greek government estimated that the introduction of the fiscal lottery, combined with stricter invoice control, would enable it to collect an additional 500 million euros (or US$615 million) on a yearly basis.

Thailand is the latest country to envisage the implementation of a fiscal lottery. The Ministry of Finance is indeed planning to reintroduce prize draws to raise the State’s tax revenue, rather than increasing the VAT rate. This new measure is expected to increase the country’s tax revenue by 10%.

Clearly, the incentivization of the consumers is a key aspect of the tax compliance enforcement strategy. In this respect, the Avatar electronic fiscal solution is currently the most advanced and the most comprehensive on the market. The developers of the Avatar Electronic Fiscal Declaration (EFD) solution have understood that it is crucial to involve the consumers, as the latter have the power to force compliance on the traders simply by claiming their purchase receipt.

That is why these developers have integrated a Fiscal Lottery Program in the Avatar EFD solution. Any receipt printed using an Avatar G4 or G5 sales-recording device displays a lottery ticket number that allows the holder to enter a lucky draw. Avatar’s EFD solution thus allows the authorities to considerably increase the number of claimed receipts, which has a positive impact on the number of receipts issued by traders.

One of the many benefits of the Avatar solution is that it brings the customers into the compliance circle through its integrated fiscal lottery mechanism, thus forcing compliance upon the merchants. Unlike other solutions, it uses a proven crowdsourcing scheme to deter VAT suppression and tax avoidance in the retail sector.


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Kenya: Kenya Revenue Authority closes in on tax evaders


Kenya: Kenya Revenue Authority closes in on tax evaders


July 23 2013

The noose is tightening around tax evaders. This comes as Kenya Revenue Authority (KRA) plans to install enhanced Electronic Tax Register (ETRs) machines by end December.

KRA Commissioner-General John Njiraini said the project to implement remote transmission of ETRs data has commenced and will be complete by end of the year.

He was speaking at the releasing the agency’s revenue performance results for the 2012/13. The move spells high noon for unscrupulous traders who have been exploiting the manual systems to falsify monthly tax returns.

The taxman is developing a system that links taxpayers’ transactions at the point of sale or in business outlets to a database in real time.

The project, however, means businesspeople will have to incur more costs to acquire new machines or modify them to be compatible to the new system. “The process will enable effective monitoring of ETRs to track usage, disconnection and locality, among others,” Njiraini said. “The initiative will capture data on buyers for the purpose of implementing customers’ loyalty programme.

This is one of the key strategies we will pursue the financial year to enhance revenue collection.” ETR machines were introduced in 2004. Traders were supposed to install the machines to enable them charge VAT on goods.

Traders were to source the machines from certified suppliers and then demand the cost of the machine as an expense from the taxman.  The process was later muddled with fake supplies. Unscrupulous traders made it difficult for the taxman to implement the reforms.


Source: Standard Media

Global economic crime spreads: Latvia has highest VAT shortfall


Global economic crime spreads: Latvia has highest VAT shortfall


3 April 2014

RIGA – Economic crimes against enterprises and other legal persons continue to grow in the world. According to the PwC 2014 annual report on global economic crime, approximately 37% of respondents admit to being victims of economic crime (up 3% on 2011)

In addition to the aforementioned figure, 25% admit to have been victims of cyber attacks, because fraudsters now often use high-tech solutions to acquire what they need.
The PwC survey, which is the most large-scale one in the world, concluded that theft remains the most popular form of economic crime in the world, as mentioned by 69% of respondents. This is followed by public procurement fraud (29%), bribery and corruption (27%), cyber crimes (24%) and accounting fraud (22%). Other types of crime include human resource fraud, money laundering, theft of intellectual property or information, mortgage fraud and tax fraud.

“Economic crime has become a truly borderless threat. The reality of fraud is that it can impact a company’s revenues as directly as other business and market forces,” – said Steven Skalak, partner in PwC’s Forensic Services practice and lead editor of the global survey.


Skalak adds that economic fraudsters continue to function. They adapt to such ever-changing global market conditions as implementation of new technologies and expansion of newly-developed countries.
He adds that the situation is only made worse by the financial impact economic crimes have on a wide range of enterprises. Economic crimes ruin internal processes, reduce employees’ honesty and reputation of companies they work for.

Where does economic crime take place?

Economic crime is a wide-spread and global problem. In a regional perspective, economic crime is present most notably in Africa, where 50% of respondents admit to have been victims (59% in 2011). It is followed by North America (41%), Eastern Europe (39%), South America and Western Europe (35% each), Asia and countries of the Pacific (32%) and the Middle East (21%).
Respondents from 65 countries and territories admit that they have had experience with economic crimes at one point or another. Respondents from South Africa note the highest level at 69% (60% in 2011). Crime rates continue to grow rapidly in Ukraine where it is measured at 63% compared to 36% three years ago, Russia stands at 60% (37% in 2011) and Australia, 57% (47% in 2011). The survey also mentions eight newly-developed countries (Brazil, Russia, India, China, South African Republic, Turkey, Mexico and Indonesia), where 40% of respondents admit they have experienced economic crime by way of outflow of riches.

Which sectors suffer the most?

Economic crimes have the highest impact on the financial sector, retail trade, the consumer goods sector and communications sector. Nearly 50% of respondents in each sector admit to have being victims of economic crimes at some point. Financial services organizations sometimes become victims of large-scale cyber crime and money laundering. Retailers and communication companies often suffer the most as a result of theft.

How to uncover fraud?

The survey concludes that 55% of all economic crimes are uncovered thanks to internal organization measures. These include reports about suspicious deals, internal auditing or fraud monitoring management. It is mentioned in the survey that respondents predict a further increase in the number of economic crimes in nearly all the categories in the near future. Managers of different enterprises are mostly concerned over corruption and bribery.


A commentary about the situation in Latvia

PwC Taxes and Legal Consultancy Department manager in Latvia Ilze Rauza describes the situation in Latvia in the following way:

‘Even though there has been no in-depth analysis of the situation in Latvia, the 2013 report about the shortfall of VAT in 27 EU member states reveals that Latvia is among those countries that have arguably the highest VAT shortfall of GDP. This indicates high rates of tax fraud in the country.’


Rauza adds that tax crimes in Latvia have only increased due to problems including household financial difficulties, benefits of economic crimes, and personal justification of committing such crimes. Without doubt, tax fraud and other types of economic crime create a serious distortion of competition in the country. Latvian courts are unable to handle the numbers of different tax disputes. However, there have been positive developments in VAT cases, which may contribute to the reduction of VAT fraud cases in the long-term.
Source: Baltic Times

SPAIN: AEAT storms multiple sites to prevent organised tax evasion


SPAIN: AEAT storms multiple sites to prevent organised tax evasion


20 March 2015

SPANISH Tax Agency (AEAT) has launched a crusade against zappers, which allow taxpayers to easily hide accounting records.

In December 2014, a special task force with AEAT technicians uncovered the complex fraudulent practices in a chain of Italian restaurants. 70 officials from 8 regional offices, along with police officers simultaneously stormed 15 sites where chain operated throughout Spain. Such organised action was necessary to prevent POS software operators to erase tax records and thus destroy tax evasion evidence.

The action uncovered a sophisticated system designed to fictitiously reduce revenue from restaurants through a software application that produces double set of books. The operation “Pasta Fresca” (Fresh Pasta) allowed AEAT to break into system matrix installed by the order of Italian franchise owned corporation. The name of the restaurants is not disclosed due to ongoing investigation. Operation Pasta Fresca is part of a plan of the Agency against the growing practice of malicious software, which is installed in cash registers or POS where accounting records are kept.

Treasury officials have discovered hidden computers in the back rooms or hidden behind secret cabinets. In this operation the officers realized that the top floor of the warehouse, under investigation, had less height than the ground floor. After searching the premises for five hours they found a room with a running server. The entrance to this room was hidden behind a wardrobe.

In July last year, similar investigation uncovered a system used by a chain of shoe stores, which diverted up to 30% of its real revenue through a double billing computer system.

In the case of Italian franchise, the system was essentially a regular management software for restaurants, but it included an option to apply fake discounts to customer bills, mostly for revenues collected in cash. The franchise also required their subsidiaries to install additional software that allowed management a access remotely (SSaaS); thus, management could decide on the amount of cash moved out from the accounting records. Franchisees restaurants had agreements to pay a royalty-commission for the use of the zapper, of around 5% of its turnover.

Agency officials made backups of all computers found in the 15 restaurants and HQ. After a first analysis, treasury sources estimated that unreported sales by these restaurants is totalling over four million euros.


Source: salesdatacontroller