Too many tax avoidance schemes in Africa


Too many tax avoidance schemes in Africa


26 July 2013

There are too many tax avoidance schemes being pursued by taxpayers in Africa, with Value Added Tax (VAT) being the most vulnerable, Anthony Ewereko Minlah, Commissioner of the Support Services Division at the Ghana Revenue Authority (GRA), has observed.

“Across Africa, there is low willingness to pay tax by taxpayers and therefore there are always attempts by corporate bodies and individuals to either evade or avoid the payment of tax, and VAT is the most vulnerable,” Mr. Minlah told 35 tax auditors from 11 African countries at the opening ceremony of the African Tax Administrators Forum (ATAF) in Accra.


The event, which is being held on the topic “Auditing in VAT Systems”, aims to expand the current knowledge of participants on how to detect and deter non-compliant taxpayers by carrying out effective, efficient and quality risk-based audits on VAT systems, as well as improving the efficacy of the tax legislation and administrations among African nations. Mr. Minlah observed that it is unfortunate that voluntary tax compliance rates in Africa continue to be among the lowest in the world.

“Our challenges as tax administrators in Africa are many. We all know it is not easy to build effective systems in Africa, but at the same instance we need the tax income for development,” he said.

“We believe that with greater support from our taxpayers we can do more. Our taxpayers must cultivate the culture of voluntary compliance to ensure improved revenue. The GRA for the past three years exceeded its revenue targets due to great support from the government and our development partners, like German Agency for International Cooperation, Ghanaian Community Network, and some good corporate bodies.”


ATAF was set up in 2009 to promote and facilitate mutual cooperation among African tax administrations and other relevant and interested stakeholders. The forum brings together heads of African tax administrations and their representatives to discuss the progress made, challenges faced, and possible new direction for African tax policy and administration in the 21st century.


Source: Business and Financial Times

Liberia: U.S.$17 Million Budget Shortfall


Liberia: U.S.$17 Million Budget Shortfall


22 January 2014

With just seven months into the 2013/14 fiscal year, Finance Minister Amara Konneh has announced a budget shortfall of about US$17 million. Minister Konneh made the revelation Tuesday, January 21, 2014 before members of the House of Representatives in plenary at the Capitol in Monrovia. Konneh’s disclosure was made at the Capitol in the wake of high cost living being experienced by Liberians across the country, while the exchange rate of the Liberian Dollar to One United States Dollar is now 87.
The “continental award-winning” Finance Minister also added that the government has also experienced a US$68m delay in its national budget, while it has generated about US$200 million since the passage of the 2013/2014 budget, further noting that the delay in the revenue generation emanated from some key government institutions, including the National Port Authority, Liberia Petroleum Refinery of Liberia, as well as the Liberia Telecommunications Authority, among others.
He accused the institutions of reneging on settling their financial obligations with the government. According to Amara Konneh, the NPA committed itself to contributing to the budget the amount of US$1 million, while the LPRC promised US$3 million, but failed to provide the amounts as enshrined in the budget. Explaining further, the Minister said the LTA was expected to generate some revenues from the issuance of licenses to technology operating institutions and the sale of Libercell- a GSM Company, which defrauded the government of US$1 million through tax invasion and was ordered closed by the Supreme Court.

“As the result of the delays in these revenues generation encountered by the Finance Ministry revenue department, the government has experienced a drastic drop in revenues in its coffers, and that the government is under pressure to meet its demands as requested by the budget; and the national budget is a law that he and his team cannot afford to violate,” Konneh noted said.


Another factor, he claimed, that was responsible for the downward trend of the economy were strategies by many taxpayers to invade taxes, but assured the people of Liberia that every effort would be exerted to ensure payment in the shortest possible time. He also disclosed that despite several development constraints confronting the Government of President Ellen Johnson-Sirleaf, fundamentally, the nation’s economy remains solid.

“The country faces further challenges due to its susceptibility to external factors; Liberia’s undiversified economy depends heavily on exports such as iron ore, rubber and timber, which are reliant on fluctuating international prices and demands. The major staple food- rice is imported, increasing vulnerability to external prices.”

“Our revised projections for 2013 imply a real GDP growth of 8.1%, compared to 7.5 percent in 2012. The higher-than-anticipated growth at the first review is associated mainly with stronger mining activities.. At the time, non-resources real GDP growth (construction in particular) had accelerated in the first half of the year, reflecting the pick-up in public investment compared to 2012, as well as robust private investment,” the minister noted.


Summing up the key expenditures of the government, Konneh pointed out that the government spent about US$15. 9 million on goods and services, while US$22. 6 million was spent on the salaries of all government employees, including the President and senior officials of government.
Meanwhile, Minister Konneh said the present demand on the national budget is at SU2bn. But what is available now is over US$500m.
Source: allAfrica

EU commences further negotiations to combat VAT fraud


EU commences further negotiations to combat VAT fraud


12 February 2014

From 1 January 2012, the EU introduced a regulation on administrative cooperation in the field of VAT. Since then, this regulation has allowed EU member states access to each others VAT databases and has facilitated the general sharing of information in an attempt to fight the ever-increasing instances of VAT fraud. This has enabled EU tax authorities to work together to decrease the amounts of lost VAT revenue (which totalled €193bn in 2011).

In an attempt to further decrease lost revenue, particularly in the telecoms and e-services sectors, the EU has undertaken exploratory talks with Norway, Russia, Canada, Turkey and China in an attempt to put in place a framework for information sharing similar to that introduced by the EU regulation. Recently, further negotiations have commenced with both Russia and Norway on the subject, and both of these countries have indicated that they would be willing to commence formal negotiations.

Source: accordance vat

How Tanzania loses $1.87 billion annually


How Tanzania loses $1.87 billion annually


13 May 2014

Tanzania loses about Sh3 trillion ($1.87 billion) in tax revenue every year through cheating by dishonest companies in import and export transactions, a new study reveal

Tanzania, according to the study, loses the most among five countries surveyed last year. The survey also involved Kenya, Uganda, Ghana and Mozambique. The amount lost annually through tax evasion can build 374 modern dispensaries at the cost of $5 million (Sh8.1 billion) each or restore the dilapidated Central Railway Line. This sum can enable Tanzania Electric Supply Company (Tanesco) to generate an additional 1,800 megawatts to greatly boost power supply in a country that has been grappling with an acute shortage of electricity for two decades.

Alternatively, the amount could be used to buy for the struggling Air Tanzania Company Limited (ATCL) 30 Airbus A320 passenger jets, which cost $60 million each. Global Financial Integrity (GFI), the US-based international financial watchdog, says in its latest report that illicit flows due to massive cheating totalled $18.73 billion in Tanzania from 2002 to 2011. Most of the money was lost in the last five years of this period.
The estimates of trade misinvoicing show that over-invoicing was common with regard to fuel imports, for which mining companies enjoy import duty exemption. This suggests that mining companies could be inflating their import costs to shift capital out of Tanzania illicitly with the added kickback of lower taxable income due to artificially inflated inputs, the report says. But The Citizen could not independently verify whether mining companies are inflating their invoices to avoid paying more taxes to the government.
The Sh3 trillion ($1.87 billion) which Tanzania loses yearly is equivalent to about 16 per cent of the current budget estimates and more than three times the General Budget Support provided by development partners, including the African Development Bank, European Commission, World Bank and nine countries. The amount is also nearly three times the amount the government will borrow through non-concessional loans in the current financial year.
According to GFI, trade misinvoicing is the intentional misstating of the value, quantity or composition of goods on customs declaration forms and invoices, usually for the purpose of evading taxes or to facilitate money laundering. The reports says Kenya losses $1.51 billion (Ksh131 billion) annually through the misinvoicing of goods followed by Ghana at $1.44 billion, Uganda at $884 million (Ush2.2 trillion) and Mozambique at $585 million.
Tanzania Revenue Authority Commissioner General Rished Bade could not be reached for comment, as he neither picked up calls or responded to text message.
Source: The East African

Tanzania: TRA Moves to Tame Fuel Tax Cheats


Tanzania: TRA Moves to Tame Fuel Tax Cheats

21 March 2015
The Tanzania Revenue Authority (TRA) is on its final trials before fixing Electronic Fiscal Devices (EFDs) at all fuel pumps, in a move aimed to improve collection of tax. The taxman said initial trials conducted for almost a year at Engen’s pump stations has shown positive results not only to the authority but to the firm on maximising revenue. The TRA Principal Officer, Mr Hamis Said Lupenja, said the trials would go on for the next few months until all discrepancies are sorted out before the procedure was formally implemented in other filling stations.
“We want to perfect the performance of the machines and devices prior to the stakeholders’ approval,” Mr Lupenja told the ‘Daily News’ at TRA headquarters on Monday.
Information from reliable source within TRA had it that the device had been specifically designed for petrol stations.
“It (device) cannot refill another car if it issues receipt to the previous car. We’re optimistic of collecting a huge sum from this system,” the source said.
Mr Lupenja said TRA’s previous directive for filling stations to use normal EFD failed, because motorists as other traders, have no culture of demanding receipts.
“We shop around and come up with the idea of fixing the EFD at the pumps. In this once a pump attendant makes a delivery it is automatically registered on TRA computers, the taxed amount,” Mr Lupenja said. “With this device, installed inside the pump, it will not matter whether a motorist demands a receipt or not, the tax is automatically collected.”
Though, he said, it is an offence to buy anything without demanding a receipt and the buyer is liable to a penalty of 1.0m/- while a trader is fined 3.0m/-.

Nevertheless, the TRA Officer said the move was part of the Authority’s second phase of expanding EFD users’ bracket to non-VAT traders. In the coming phase to be launched mid next month 200,000 traders are targeted. The traders eyed those with their annual business return which is 14m/- and above, but for filling stations it will be applicable even if their stations are selling below the prescribed figure. According to TRA, the service has been well received by Engen as it assists them on recording the right sales to gauge out any element of fuel pilferage.

“But we will continue with the trial run until all stakeholders’ doubts are addressed,” he said.
The stakeholders include Tanzania Bureau of Standard, Weigh and Measure Authority, as well as oil dealers. The same system of refunding EFD traders will be extended to the filling station owners where they bought the device and they’ll be repaid during the sales processing.

Since the introduction of EFDs 2010 positive achievement were recorded on tax collection from VAT docket as its revenue increased by over 23 per cent in the said period.

“I don’t have a figure with me, but it’s more than billions of shillings,” Mr Lupenja said. The statistics department is working on the numbers.”“
The Bank of Tanzania data shows that TRA collected 864.9bn/- in December last year and exceeded target by 4.4 per cent compared to the previous month. The main challenge the taxmen are facing is awareness as advantages of EFDs are in three dimensions — trader, customer and the public — on issuing and demanding the receipts after every purchase. Engen Petroleum Tanzania was founded in 1996 when Engen Petroleum Limited purchased the Kurasini Terminal, Isaka Depot and Kigoma Depot from Bulk Oil Ltd.