Additional tax revenue through Avatar Technologies : A solution to finance infrastructure in Africa

25 May 2016

The continent has to reply on putting in place infrastructure in order to maintain its economic growth. However, Africa is experiencing a huge financing gap for its infrastructure projects and to solve this Africa needs to opt for mobilising a wide array of sources, in particular increasing its tax revenue. 

Some solutions have been developed by Avatar Technologies aiming to increase the tax base and in doing so additional revenue can be obtained for the financing of national projects on the continent. Its advantages include the control in real time by governments of the tax transactions in their country, the cost reduction of tax collection and the means of combatting tax evasion.

The revenue generated through Avatar Technologies could be redirected to finance infrastructure in Africa and in this way the continent can dramatically reduce its dependence on foreign aid by using its own resources.

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African countries need to improve tax collection

 

16 May 2016 

If Africa is to achieve its sustainable development goals, the continent needs to ensure absolutely no revenue is lost – especially focussing on ensuring no revenue is lost through tax evasion and fraud. 

 

Tax systems in African countries are under-developed. If Africa were to improve its tax collection systems, the increased revenue could fund major development projects.  

 

“Using tax revenue to invest in human development isn’t only good for individuals and families; it also builds the human capital that fuels economic growth.” With improved tax collection and increased revenue, the governments can use this money to deliver on their promises. 

 

“Effective public finance won’t happen overnight but it can be done.”

 

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How we help African governments enforce tax compliance

5 May 2016

Tax compliance is a worldwide issue, but it is particularly problematic in developing and emerging countries, where the difference between the tax (VAT) due to the State and what is actually collected is 50% in-60%, compared with 7%-13% in developed countries. In Africa alone, an estimated US$50 billion is lost each year due to fraud and tax avoidance. Governments must be at the forefront of initiatives to develop the necessary capacities in their countries, because, as a result of fraud, governments are missing out on a huge amount of revenue which could be employed to put in place modern and progressive tax systems and to finance development projects.

There is major scope to enlarge Africa’s tax base —estimated at being a USD 300 billion opportunity—as the introduction of electronic systems can simplify and boost efficiency in the collection of tax payments.

Avatar Technologies offers the only electronic fiscal declaration (EFD) solution which has been specifically designed to successfully address tax compliance issues in both developed and developing countries. This EFD solution can effectively support the tax system of emerging and developing countries. It is cloud-based, highly secure and works in real-time to create an environment that promotes tax compliance. In this way, it benefits both taxpayers and governments.

The EFD solution is simple and affordable. It promotes fairness and transparency, thus supporting the World Bank’s three pillars of tax reform:

• simpler and cheaper
• fair
• transparent

Already-existing devices and Smartphones can be seamlessly integrated into the solution and the EFD devices are robust and have a high level of autonomy. This means they allow for both remote audit and activation and as such can be used in businesses which are located in remote areas.

The Avatar solution is much more than a tax management system, as it provides the governments of countries that adopt its solution with an innovative financing mechanism enabling them to secure funds for development while compensating for dwindling foreign aid and avoiding additional dependence on foreign debt.

The real-time invoicing which Avatar Technologies makes possible could be a real boon for the government. It allows for more effective monitoring and makes fraud and evasion more difficult, as transaction data transmitted in real-time is harder to manipulate and/or delete (anti-zapping capacities).

In addition, to encourage tax compliance, several African countries have embarked on innovative initiatives such as receipt-based fiscal lotteries. While obtaining a receipt for any legal transaction does not cost the consumer anything extra, it becomes valuable as it serves as a lottery ticket. In this way, transactions are more likely to be part of the official (not the shadow) economy and VAT can be collected by the tax authorities. For the tax authority, the cost of administering the lottery and paying the correspondingl prizes is, in turn, far outweighed by the extra revenue of an increased tax base and by the citizen-policing effect of detecting VAT-dodging businesses.

Specific steps that countries can take to increase their fiscal space include:

• strengthening tax audits
• simplifying tax systems
• increasing the focus on larger taxpayers
• modernising tax collection.

The electronic fiscal solution Avatar Technologies can provide would standardise and simplify internal processes, close major tax loopholes and improve collection procedures. Given the tremendous funding needs to meet the continent’s development goals and the scope to raise revenues from a diversity of sources, Avatar’s EFD solution represents a major opportunity for African countries. The time to plug leaking revenues is now.

The New Way To Collect Taxes

25 April 2016

Tax fraud and evasion are very real issues in African countries. 

Technology platforms such as the Avatar Electronic Fiscal Device (EFD) enable African countries to collect taxes electronically. Traders are equipped with electronic sales recording devices as all tax calculations are automated, which reduces the possibility of tax fraud or evasion.

The reduction of tax fraud in Africa will increase government’s incomes and generate a financial surplus for African counties. This surplus can help fund development projects in the countries. 

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Mali advised to review its tax system 

23 March 2016

The International Monetary Fund (IMF) recently took a close look at Mali’s tax policies and recommended that Mali needs to improve it’s tax system if they wish to finance their own development. 

 Currently, their tax revenue to Gross Domestic Product (GDP) is below 17%, which is needed for the country to meet commitments as a member of the West African Economic and Monetary Union. Mali needs to find innovative and new ways to collecting tax and increasing governmental revenues to fund their development projects. 

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Avatar Technologies Can Reduce The African Debt Pile

07 April 2016

Some of the problems exacerbating the debt situation of African countries are their small tax bases, the lack of tax compliance, tax avoidance, and fraud. Although tax compliance is a worldwide issue, it is particularly problematic in developing and emerging countries where the difference between the VAT due to the State and that actually collected is 50%-60%, compared with 7%-13% in developed countries. This is a significant difference and means that governments are missing out on a huge amount of revenue and are severely hampered in their efforts to put in place modern and progressive tax systems. Not to mention the development projects that this lost revenue could finance.

It is clear that the introduction of electronic systems can simplify and boost efficiency in the collection of tax payments.

Avatar Technologies offers the only Electronic Fiscal Solution (EFD) designed to address tax compliance issues successfully in both developed and developing countries. This cloud-based and highly secure solution works in real time to create an environment that promotes tax compliance and benefits both taxpayers and governments.

Rising levels of government debt in African countries, are a cause for concern—in 2015 Africa’s sovereign debt levels rose to 44% of GDP, a 10%increase over debt levels five years ago when Africa’s debt-to GDP ratio stood at 34%.

Against this background, Avatar Technologies’s EFD solution can effectively support the tax system of emerging and developing countries. The solution is simple and affordable and promotes fairness and transparency, thus supporting the World Bank’s three pillars of reform (“simpler and cheaper”, “fair” and “transparent”). Already-existing devices and Smartphones can be seamlessly integrated into the solution. Furthermore, the devices have a high level of autonomy, they are robust allowing for both remote audit and activation, which means they can be used in businesses located in remote areas.

In a bid to encourage tax compliance several African countries have also embarked on innovative initiatives such as receipt-based lotteries

• Egypt’s Finance Ministry has announced it will issue lottery prizes in order to motivate businesses to issue invoices and customers to demand them, to promote the soon to be introduced VAT system.
• In Rwanda, the Rwanda Revenue Authority (RRA) has said the new consumer lottery is boosting the use of Electronic Billing Machines (EBMs) introduced to curb the evasion of Value Added Tax (VAT). According to the tax body, over 9,700 taxpayers registered for VAT have already bought the EBMs compared with the total number of VAT registered taxpayers of 12,000.

• The Tanzanian Revenue Authority (TRA) also plans to introduce prizes. The TRA’s Principal Taxpayer Service Officer, Rose Mahendeka said at a seminar in Dar-es-Salaam that the culture of asking for receipts after buying goods will check revenue loss. She said the practice will not only boost revenue collection but curb leakages used by some traders in dodging tax. According to the tax body, over 9,700 taxpayers registered for VAT have already bought the EBMs compared with the total number of VAT registered taxpayers of 12,000.

While obtaining a receipt for any legal transaction does not cost the consumer anything extra, it becomes valuable as it serves as a lottery ticket. For the tax authority, the cost of paying prizes and administering the lottery is, in turn, outweighed by the extra revenue of an increased tax base and by the citizen-policing effect of detecting VAT-dodging businesses. In this way, transactions are more likely to be part of the official (not the shadow) economy and VAT can be collected by the tax authorities/government. Further improvement in technology use is set to augment further collections as more traders acquire and use the Electronic Fiscal Devices (EFDs).

Furthermore, AVATAR TECHNOLOGIES can assist tax authorities by making real-time invoicing a reality. A key element for successful tax collection starts with a committed and accountable leadership that sets the right tone at the top. In Africa alone, an estimated US$50 billion is lost each year due to fraud and tax avoidance. Governments must be at the forefront of initiatives to develop the necessary capacities in their countries because this is lost revenue that could be used for development.

Much more than a tax management system, the Avatar solution provides the government of countries that adopt its solution with an innovative financing mechanism enabling it to secure funds for development while compensating for dwindling foreign aid.

Electricity is crucial for development

26 February 2016

Avatar Technologies can provide solutions to help governments raise revenues to finance electrification.

One of the areas which is crucially important for economic and social development in any country is the energy supply sector. However, economic growth is only possible when the power sector is in line with the national development plans of the country concerned.

 Securing affordable green energy

Sub-Saharan Africa is facing the trilemma of security of power supply that has a low carbon footprint (sustainability) and is affordable. The challenge is aging infrastructures that are unable to meet current power demands. Two key aspects will be:

• upgrading, refurbishing, and process optimisation for existing generation assets
• building new generation assets

This is an expensive but imperative development process for the economic development of any emerging or developing country and an ideal area for innovative financing for development to provide the necessary revenue.

Pre-paid meters—only half the solution

Installing pre-paid meters is a big part of the solution and will protect the revenues of electricity suppliers. These meters are already having an impact in a number of countries including Kenya, Nigeria, Uganda, Zambia and Zimbabwe. The growth potential is immense.

Very soon, however, infrastructure will not be the biggest obstacle— payment will. Making payment points widely available for people to purchase prepaid electricity vouchers is important when people live in very remote areas.

 Cash is still king in many areas

In Africa, people have high levels of mobile access compared to other basic services. Mobile may be the best way to distribute prepaid vouchers. Cash, however, is still king in a lot of informal markets. Perhaps the best solution to Africa’s electricity payment challenge is to empower informal vendors such as taxi drivers, local shop owners and micro businesses to use mobile technology to buy prepaid electricity vouchers. They can then sell these for cash.

 Governments can fund power plants through innovative financing for development

The African continent needs power plants and a reliable, large-scale power supply for factories, mines and mills. Governments can fund the electrification of their countries through innovative financing for development—micro-contributions on incoming international telephone calls, mobile credit top-ups, remittances, tourist arrivals—this list is not exhaustive as there are a whole range of funding sources appropriate for any specific country. This will allow the country’s government to fund power developments without incurring additional debt or relying on Official Donor Assistance (ODA).

A ready-made financing mechanism

Global Voice Group’s technological partner Avatar Technologies can assist tax authorities to improve fiscal compliance and increase national revenues to fund green energy through real-time VAT invoicing.

Tax compliance—a worldwide issue, is particularly problematic in developing and emerging countries. The Avatar solution provides the government of countries that adopt its solution with a ready-made innovative financing mechanism enabling it to secure funds for development while compensating for dwindling foreign aid.

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.

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Avatar Technologies can assist tax authorities with real-time invoicing

16 February 2016

“In Africa alone, an estimated USD 50 billion is lost each year due to fraud and tax avoidance.” Countries have the opportunity to increase government revenue by focussing on improving tax collection, and reducing tax fraud. 

Avatar Technologies provides Electronic Fiscal Solutions designed to address tax compliance issues successfully. This cloud-based, secure solution works to create an environment that promotes tax compliance and benefits both taxpayers and governments. The sales-recording devices have a high level of autonomy, and can be used by businesses located in remote areas. 

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Formalizing the underground economy in Romania

 

25 January 2016

How Avatar Technologies can help the Romanian government optimize tax collection for the benefit of the country’s economy.

Taxes play an essential role in the economy of any country. But emerging countries like Romania are more likely to struggle with budget shortfalls, so the necessity to collect taxes effectively takes on even more importance. For the governments of these countries, an increase in tax revenue, brought about through the formalizing of informal trading and the control of tax fraud, means a stronger economy.

Informal trading is crippling the Romanian economy. It currently represents as much as 28% of the GDP, or EUR 30 billion. According to Catalin Cretu, Regional Director of Visa Europe for Romania, Croatia and Slovenia, this is due to the fact that card payments are not widespread in Romania. “The inverse relationship between the degree of electronic payments and the underground economy is obvious at European level,” says Cretu.

It has been proved that electronic tools, such as POS systems, are more effective than paper-based methods when it comes to recording sales and, importantly, the corresponding VAT. The Electronic Fiscal Declaration (EFD) solution proposed by Avatar Technologies, a parent company of Global Voice Group (GVG), has the capacity to optimize tax collection and compliance in the Romanian retail sector. It gives the authorities easy and total access to sales- and tax-related data, which leads to improved tax collection and reduced tax fraud.

The EFD solution is effective even in countries where people still prefer paying cash, as is the case in Romania. It helps create an environment in which the benefits of integrating the formal economy eventually outweigh those of remaining informal, both for traders and consumers. The EFD terminals are affordable, and traders are given free access to several value-added services. Their clients are automatically entered into a prize draw when they request their receipt, which doubles up as a lottery ticket. The solution also facilitates the authorities’ work by allowing them to carry out checks on the taxpayers, via a secure device-monitoring interface.

With Avatar’s EFD solution, Romania may well achieve, or even overachieve, the objective of collecting 30% of its taxes through card purchases, which would allow the government to secure EUR 5.2 million. 

Read the whole article: http://www.romania-insider.com/romanias-underground-economy-more-than-a-quarter-of-gdp/160715/