TRA: Buses to have EFDs too–but later

April 2013

The Tanzania Revenue Authority has said it is collaborating with several other stakeholders including the Surface and Marine Transport Regulatory Authority (Sumatra) in implementing the use of electronic fiscal devices (EFDs). In a note emailed to this paper yesterday, the agency said they were jointly engaged in overseeing the proper administration of the transport sector in the country.

“Police deal with entire enforcement of the regime to ensure that the transportation of people and goods is safe, fair, simple and transparent,” it added, clarifying a front-page news story published in yesterday’s issue of this paper.

The agency said the idea was not merely to install EFDs in commuter buses so as to arrest overcharging of unsuspected travellers as the actual fare would be recorded. The plan has nothing to do with control of transportation costs, high fares prices and neither will the use of the devices necessarily provide relief to travellers as such, it added.

“However, the use of EFDs as a tool to capture sales will ensure that everybody is provided with an EFD receipt to provide assurance to a passenger that the right receipt is issued, tax contributions to the government have been made and the owner of the bus pays the right tax based on sales generated from the machines,” it elaborated.

TRA director of Education and Taxpayer Services Richard Kayombo said in later remarks to this paper that the current (second) phase of the use of EFDs, which takes effect mid next month and is meant to cover 200,000 entrepreneurs, would not involve commuter bus transportation – “but that time will finally come”.

TRA assistant commissioner (Domestic Revenue) Generose Bateyunga and principal taxpayer education officer Hamisi Lupenja stressed during talks with editors in Dar es Salaam earlier this month that the agency was determined to ensure that all people supposed to pay tax are identified and reached and actually pay correctly assessed amounts

They underlined the need for TRA to cast the tax net much wider than is now the case, which would mean diversifying sources of revenue instead of targeting only traditional ones such as are found in the formal sector, alongside gradually and strategically plugging notorious loopholes. The officials explained that EFDs were assets ensuring fairness and transparency in tax assessment as well improvement in the compilation of business records while minimising pilferage, maximising profits, and ultimately raising VAT revenue collections.

Source: ibn-tv

Rwanda: Supplement – RRA Experts Answer Questions About Electronic Billing Machines

28 APRIL 2013

INTERVIEW

Rwanda has introduced legislation which will help businesses to keep their books properly and also improve tax compliance. The new law is also specifically designed to stop tax evasion and starting this year, every business registered for VAT must provide a customer with certified receipt for every sold good or service.

This will require businesses to install an Electronic Billing Machine (EBM), which keeps records of all the sales. It comprises of two components, a Certified Invoicing System (CIS) and a Sales Data Controller (SDC). The groups of taxpayers which must have the device installed will be announced by public notice, as installation will be carried out in phases.

By end of each phase, this law will apply to every business registered in Rwanda, including every newly registered taxpayer.

The Rwanda Focus talked to Goran Todorov, an EBM consultant hired by RRA, and Charles Kabera, RRA’s head of Risk Management Division in the Domestic Tax Department, who are overseeing the EMB project, to answer questions that taxpayers might have.

Which taxpayers are the EBMs targeting and under which legal mandate?

The EBM initiative is meant to help RRA boast its domestic tax collections and it targets all registered VAT taxpayers, a list of whom we have.

As for the legal mandate for this, reference is made to article 24 of law n° 37/2012 of 09/11/2012 establishing the value added tax which states that ‘Value added tax registered persons are obliged to use a certified electronic billing machine that generates invoices indicating the tax as agreed by the tax administration’.

There are over 7000 VAT registered persons/businesses with the RRA and all these will be required to operate with the EBMs.

How exactly are these EBMs supposed to work?

The Sales Data Controller (SDC) is a small electronic device connected to the taxpayer’s Invoicing system. The SDC records every transaction printed by Certified Invoicing System (CIS) which ensures that every printed certified receipt contains a special electronic signature obtained from SDC in the approved format. The SDC itself is tested and accredited by RRA to be secure and tamper-proof. Rwanda Revenue Authority auditors can access any SDC and quickly detect any missing taxes.

Summary on EBMs

• All registered VAT taxpayers are required by the VAT law to install EBMs.
• RRA has given out 500 EBMs under a pilot project to help kickstart their introduction.
• The RRA commissioner General will announce dates and phases in which all other VAT taxpayers will be required to acquire and install EBMs in their businesses.
• The EBMs will help RRA increase efficiency in collecting more taxes to help in the growth of our country.
• RRA is creating awareness on the use of EBMs to ensure taxpayers are not found on the wrong side of the law.
• RRA will issue a check list which will guide both suppliers and users on the right specifications of the EBM to buy.
• If you are a registered VAT taxpayer and plan to acquire an EBM, seek help from your nearby RRA office on the process and what you need.
• Once you have the EBM, ensure it’s working well so that all sales reports are filed. Also teach all sales staff on how to operate the EBMs.
• Countries that have used EBMs have registered massive success in tax collection, Rwanda can succeed as well.
• Customers should henceforth demand an EBM printed receipt whenever they pay for goods or services.

What should taxpayers who already have some form of invoicing system do?

We know there are many in this case but they needn’t worry because EBMs are designed to suite every business environment. However if a taxpayer already owns an invoice processing equipment, they must make sure that their system is compatible with new RRA requirements, as soon as possible.

The requirements and the testing method are provided by RRA.

If taxpayer already has a new invoicing system that meets all the required specifications of RRA, he must check that his agents/business outlets elsewhere are on top of these changes as well and plan to roll out an upgrade in time to comply with EBM rules. Some agents may be reluctant to comply, or even give up on the Rwanda market altogether. The fact is a taxpayer doesn’t want to be vulnerable to fines and penalties from RRA just because a vendor doesn’t want to do the upgrade.

How does the taxpayer find the right Electronic Billing Machine?

Based on other countries experiences which have rolled out similar invoicing regulations, it has proven difficult for the market to get certified systems on time. For this reason, Rwanda Revenue Authority has eased up on the requirements and decided to roll out implementation in phases.

All Electronic Billing Machines must be certified. This means that it is necessary to have a Certified Invoicing System (CIS) and Sales Data Controller (SDC). The RRA is developing a certificate checklist which taxpayers will use as reference to guide them in identifying the devises of their choice.

Also note that the EBMs may come in different versions or types as made or developed by a different manufacturer; that is not a problem, what is important is that whichever model you choose, it must meet the specifications provided by RRA to ensure it is compatible with the reporting system. To ensure that taxpayers buy the right EBM devices, RRA is working closely with the private sector and has already trained members of the ICT chamber which has ICT equipment suppliers, software developers and other traders who might want to supply the market, these are already aware of the requirements and will help taxpayers get along.

Taxpayers can also visit the RRA website where a specially developed page on EBMs has been added which is regularly updated with developments on this project; all are advised to visit www.rra.gov.rw for details. If taxpayer is still not sure who is authorized supplier, our call center will provide consultations, just dial 3004.

How will the use of EBMs by VAT-registered taxpayers benefit all involved?

The use of EBMs is of great importance to the taxpayer, the consumer and the country/government at large.

To the taxpayer:

• The system provides a tailor-made book keeping solution where once every sale detail is filed in the device, the data are recorded on the system and immediately communicated to the RRA system.
• The EBMs will help the taxpayer to be a better tax complier and help in steering the growth of our country.
• The EBMs will promote fair competition on the market. Where in the past some enterprises evaded taxes hence earning illegal profits, the system will ensure everyone earns his due and pays what belongs to the government hence promoting fairness. It will also reduce financial embezzlement in businesses, corruption and other malpractices business owners tend to suffer in their absence.

To the consumer:

• Citizens will, thanks to these secure devices, know exactly how much they paid for goods or service and tax burden will be clearly justified. It’s therefore paramount for consumers to insist on a receipt for whatever good or service. All receipts produced have a special electronic signature which can be verified by RRA or the consumer. This again ensures transparency.
• To encourage this receipt practice among consumers, RRA will introduce a competition where citizens with the biggest number of locally issued receipts get rewarded. If you demand a receipt it means the seller will have to use the EBM to issue one, it also means the VAT tax, which is compulsory anyway, is deducted, it means as a citizen, you have contributed to national treasury hence growth.

To RRA:

• Domestic taxes are important sources of revenue to any country. It’s from these taxes that the government gets money to provide its citizens with public goods and services such as security, health, salaries to government workers and many others. The bigger our domestic tax base, the better our chances of becoming financially independent and reduce on donor aid. While we have thousands of good compliant and honest taxpayers, there are those who are also determined to evade taxes hence leaving the tax burden on a few.
• The successful implementation of EBMs will help us curb VAT tax evasion and increase our domestic tax collection by a good percentage.
• The system will also improve the relationship between taxpayers and RRA as the tax sales reporting will be straight forward as well as tax deductions.
• Finally, it will reduce RRA’s overhead cost of sending dozens of auditors to the field to track down taxes, this will become less expensive.

You can help us achieve all these by cooperating.

Source: Rwanda Focus (Kigali)

Successful implementation of EFDs

14 July 2015

Electronic tax administration is claimed to improve tax compliance and collection. A number of countries worldwide have thus made the transition from paper-based to electronic methods. In their paper on the impact of Electronic Fiscal Devices (EFDs) on taxpayer compliance and administrative efficiency, Peter Casey and Patricio Castro analyze the possible reasons why the implementation of such devices has not yielded the expected results in some countries.

In Greece, Tanzania and Kenya, for instance, compliance problems seem to be the reason for these mixed results. In Greece particularly, traders simply choose not to use the EFDs or find ways to tamper with the data. In Kenya, they complain about the high purchase price of the devices and about the inadequacy of the support and maintenance services. But the issue all three countries seem to have in common is the lack of an effective compliance monitoring and support strategy.

In other parts of the world, on the other hand, EFDs have received glowing reports from the authorities. Revenu Québec, the tax authority of the Canadian province, reported impressive results following the implementation of the Resto Project. This initiative aims at curbing tax fraud in the restaurant industry by imposing the use of sophisticated sales-recording modules (SRMs).

Implemented from 2008 to 2011, the Resto Project allowed the government of Quebec to collect in excess of $160 million, or $60 million more than expected, between 2011 and 2012. By way of comparison, in 2008 and 2009, the tax leakage in the catering industry was estimated at $425 million annually. Furthermore, projections indicate that by 2018-2019, Revenu Québec will have recovered a total of $2.4 billion in consumption taxes and income taxes that would otherwise have remained unpaid by restaurant owners. In addition to the recovered revenue, the Resto Project cut inspection costs by 96%, and the duration of inspections from 70 to 3 hours.

So what did Revenu Quebec do differently to achieve such remarkable results? According to the authority’s official report^[1], the key success factor was the establishment of a relationship of trust with the restaurant owners. Revenu Québec endeavored to minimize the repercussions the project might have had on their business. Looking back at the Greek, Kenyan and Tanzanian examples, it seems fair to argue that the EFDs would have been more readily accepted by the taxpayers if the tax authorities had provided them with the same level of support.

The approach of Avatar Technologies, a company founded by Global Voice Group (GVG), to the monitoring of tax compliance is similar to that of Revenu Québec. Avatar seeks to win over the taxpayers by making compliance easy, affordable and rewarding for them. The taxpayers who make use of Avatar Technologies’ EFD solution benefit from 24/7 in-country customer support and are given free access to several value-added services, such as AvatarBooks^TM, a fiscally compliant accounting and tax management application.

But what gives Avatar Technologies’ EFD solution the edge is crowdsourcing. Unlike other solutions, it involves the consumers in the compliance process by rewarding those who make a point of claiming their tax invoice. A Fiscal Lottery program was integrated into the solution specifically to serve this purpose. Avatar therefore takes a holistic approach to tax compliance, which takes into account both the technological and human aspects.

Read the whole paper: http://www.imf.org/external/pubs/cat/longres.aspx?sk=42820.0 

[1] The Resto Project – Mandatory Billing in the Restaurant Sector, Revenu Québec, May 2012