Tanzania: Tax Device Imports ‘Questionable’
6 January 2014
As the Treasury plans to register more than 200,000 new Electronic Fiscal Device (EFD) holders this year, the gadgets may soon be blocked by court action following a query by Tanzania Taxpayers’ Association. Among other things TTA is questioning legitimacy of a contract signed between Tanzania Revenue Authority (TRA) and the gadgets’ manufacturers and distributors. The taxpayers’ association Chairman, Otieno Igogo said in Dar es Salaam that the deal signed between TRA and two Bulgarian and Italian based firms raises more questions than answers, hence may be forced to seek the court’s interpretation of the laws governing tax collection.
“This whole contract is questionable, first because there is no record of a competitive tender having being floated then there is the issue of monopoly granted to these firms and their distributors which is contrary to our laws,” Mr Igogo argued.
He said a cartel of local and foreign firms backed by TRA are unfairly imposing hiked prices for the gadgets while businesses are being forced to lend more than 91bn/- to the revenue body without being paid interest, but also forcing EFD registered users to get services and accessories from the same cartel.
“For example, businesses are forced to buy paper rolls for use with the devices from accredited distributors at 16,000/- each while in the local market the same can be bought for 1,000/-,” he revealed while questioning quality of the paper which gets erased in 30 days.
But TRA acting Commissioner General, Rished Bade dismissed much of the TTA Chairman’s arguments saying it does not reflect reality.
“The paper roll’s restrictions are due to quality as this does not get erased but the price is also much lower,” Mr Bade argued. He further noted that the 500,000/- service fees is not applicable as distributors are required to maintain the machines for a whole year as per the terms of the signed contract with TRA.
Bade also noted that the issue of raising the threshold is not TRA’s responsibility hence advised TTA to face policy makers. Igogo also said apart from paying close to 800,000/- cash to acquire the EFD gadget through distributors and not TRA or any other government agent which is then remitted to the manufacturer abroad who doesn’t pay local taxes.
“This whole contract raised several serious questions which should force the government to suspend phase II of the roll out project and examine this contract which will drive many small and medium scale businesses out of business,” he argued.
Meanwhile, the Treasury has warned that come February 1, 2014 all defaulters will start facing legal penalties which include a possible 12 months jail term upon conviction by the courts of law. The ‘Daily News’ investigations have established that there is still resistance by businesses to acquire the gadgets which Treasury argues will help increase government revenue, get rid of corruption by tax collectors and do away with estimations. The TTA Chairman further questioned the 14m/- threshold annual turnover as qualification for one to be required compulsorily to acquire the EFD machines whose prices peaks over 800,000/-.
“This move will drive out of business many small scale businesses because the burden of paying for the EFD machine is unbearable,” Mr Igogo argued while suggesting that the minimum threshold should be pegged at 20m/- turnover per annum.
“Many small scale businesses have 14m/- turnover annually which if we take into consideration 30 per cent profit recognized by the Income Tax Act, we get 9.8m/- which translates to 816,000/- as starting capital and this is what the EFD costs,” argued Igogo who is the immediate former President of Tanzania Freight Forwarders Association (TAFFA).
TRA contracted Italian based Customs Engineering SPA and RCH-SPA and two Bulgarian based Datecs Ltd and Incotax Systems Ltd to manufacture the tailor made EFD machines, which were first introduced in 2010 and so far more than 16,000 value added tax payers acquired at a hefty price of 2m/- each. The number of distributors has increased from two, BMTL Limited and Total Fiscal Solutions Limited as sole distributors before the list was further increased to current 11 countrywide with prices falling to between 600,000/- and 778,377/- each depending on model and make.