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Author: rodelin

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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

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Rwanda: Special Feature – RRA Extends Deadline for Electronic Billing Machines to March 31

 

Rwanda: Special Feature – RRA Extends Deadline for Electronic Billing Machines to March 31

 

23 January 2014

In a bid to ensure that all businesses comply with the installation and use of Electronic Billing Machines (EBM), Rwanda Revenue Authority (RRA) has extended the deadline from December 31 to March 31. The extension is meant to provide enough time for VAT-registered tax payers to purchase machines and also give time to those who would wish to apply for exemptions from the use of machines to do so.
 
The tax body has increased awareness through a campaign to emphasize the use of Electronic Billing Machines which aim to boost tax compliance as well as ease doing business. 

RRA introduced the machines in February last year with a pilot phase that saw over 800 machines distributed for free to selected businesses around Kigali. With the pilot phase successful, RRA began rollout out of the machines to all VAT registered taxpayers.
 
The tax body says that every business registered for VAT will have to provide a customer with a receipt issued through the EBM for every good or service sold. The groups of taxpayers which must have a special devices installed on its premises to record every sale will be announced by Public Notice, as installation will be carried out in phases. If a business does not have an authorized EBM in place by the announced deadline, it could face a substantial fine.
 

What is the purpose of EBM? 

Besides combating tax evasion and corruption, Electronic Billing Machines will provide a market balance and make equal business opportunities for every entrepreneur.
 
Rwanda Revenue Authority knows that most businesses are not paying their full taxes, and to prove that fact, auditors often spend countless hours investigating and combing through massive documentation, which disrupts the operations of both honest taxpayers and those who evade taxes on purpose. Thanks to EBMs, VAT paid by the citizens and businesses will be instantly recorded and the audit itself will become much simpler.
 
The ambition to raise more internal revenue benefits all citizens who will eventually enjoy better social programs, and the money for that will be coming from VAT.
 

How does Electronic Billing Machine work?

The Sales Data Controller (SDC) records every transaction received from the Certified Invoicing System (CIS), and then ensures that an electronic signature is printed on the receipt. The signature is verifiable by RRA officers using a special decryption tool that is unique for every installed SDC device, thus allowing detection of any falsification. The SDC itself was carefully designed to be secure and tamper-proof. Rwanda Revenue Authority auditors can access any SDC and quickly detect missing taxes.
 
Electronic Billing Machines are designed to suit every business environment. If taxpayers already own invoice-processing equipment, they must make sure their system is compatible with requirements, as soon as possible. A buyer (registered VAT taxpayer) is required to ask the vendor (distributor of the machine) about the compatibility. 

The requirements and the testing method are provided by the SDC, a small electronic device that sits at the heart of the taxpayer’s financial system. Options for its installation depend on the brand and models offered by suppliers. In order to ensure that you are buying a certified machine compliant to RRA’s requirements, users are asked to read information published on each certificate before procuring equipment, as differences exist in the specific options each model has to offer.
 
Taxpayers must be aware not to buy equipment from those who merely claim to be certified; instead, always look at the source of information. If a taxpayer is still not sure who is authorized supplier, our call center will provide consultations, just dial 3004.
 

How can you tell if you are buying from a certified supplier? 

RRA has already certified three vendors who are currently the only vendors supposed to supply the machines. This is done to ensure that the machines on the market meet the requirements. The taxpayer is responsible for ensuring that the CIS is SDC compatible and that it can communicate with the SDC of your choice. SDC compatible means that CIS has equal connectivity settings, which must be adjusted to meet manufacturer’s installation requirements.
 
The tax body issues a confirmation of certification that recognizes the compatibility of the CIS with SDC. This applies only to CIS products and this certificate is not a license to sell. Certificate holders that further develop their products are responsible for ensuring that the certificate is listed here and is updated and remains compatible with technical specification. The certificate is only applicable to the product in the configuration that has been evaluated by Rwanda Revenue Authority.
 

Who is exempted from using the EBMs? 

There is a window for exemptions from the EBMs for some of registered taxpayers. To obtain this exemption, the taxpayer must apply to the tax body, specifying reasons for their inability to use EBMs. The Exemption is line with Articles 17, 18, 19 and 20 of Commissioner General Rules n° 002/2013 of 12/09/2013 implementing the ministerial order no 002/13/10/TC of 31/07/2013 on modalities of use of certified electronic billing machines.

Taxpayers eligible to apply for exemption are:

  • All VAT registered businesses where the scope of VAT sales is small compared to the company’s total sales. Sales that add up to 75% of the company’s income derived from exempted services.
  • All VAT registered businesses whose sales are only conducted during a limited portion of the year. However, any such taxpayer will not be exempted if sales total at least 30 invoices during a calendar year. Such businesses need to apply for exemption.

  

Penalties and Conditions for not complying

Much as the RRA is asking VAT taxpayers to meet the new deadline for implementing the installation of Electronic Billing Machines, which has been extended to March 31 this year, the tax body says it will withdraw administrative privileges from all VAT registered taxpayers who have not complied with the first deadline of December 31, 2013.

“RRA will immediately withdraw administrative privileges formally granted to compliant taxpayers for those who will not have complied with the set deadline,” said Drocella Mukashyaka, the Deputy Commissioner for Taxpayer Services at RRA.

 

The penalties and conditions will also affect those who have not obtained exemptions from the use of EBMs as privileged in the law. The tax body says that the assessment is still ongoing and asks taxpayers to take the chance to conform to the rules. Accordingly, the taxpayers who have not met the deadline will lose the privileges that the tax body gives to compliant taxpayers, including Quitus Fiscal, Blue Channel, Gold Card scheme and all installment payments for taxes.
 
Mukashyaka says that the reason behind the penalties is to enforce the maximum use of EBMs by VAT registered taxpayers as well as discourage dodgy taxpayers from engaging in tax evasion by not issuing tax invoices to their clients using these machines. Non-compliant taxpayers who participate in public tenders will be stripped of the tax clearance certificates and statement of arrears that are important in tendering processes.
 
To emphasize this measure, Rwanda Revenue Authority has also set up fines for non-compliant businesses that will not have met the March 31 deadline. The fines range from Rwf 5 million to Rwf 20 million. Mukashyaka notes that the privileges are crucial to businesses and therefore, so is the need to install the machines and retain them.
 

Rwanda Revenue Authority continues to reward consumers 

As a way of increasing awareness on the use of Electronic Billing Machines (EBMs), Rwanda Revenue Authority introduced awards that are aimed at rewarding consumers who demand invoices (receipts) issued by such machines.
 
The Consumer Excellence Award was introduced last year to promote the culture of asking for receipts whenever one purchases a product or a service. The Awards, along other efforts Rwanda Revenue Authority has put in place to boost the use of EBMs, are expected to increase compliance of VAT collection, one of the country’s taxes that boost domestic revenues. RRA believes that including consumers in the efforts to encourage the use of the machines is reaping positive results with more people now opting to buy from businesses that have installed machines, thanks to the awards.

“I want to thank special consumers who have taken heed of our call to ask for invoices and we will continue to reward them for their efforts to support the development of their country through promoting tax compliance,” said Richard Tushabe, the Rwanda Revenue Authority (RRA) Deputy Commissioner General.

 

25 consumers are awarded cash and other prizes every week in draws that are automatically done in a secure and highly protected electronic way. The 25 lucky winners, who will be walking away with various prizes every week, including a cash prize of RWF 100,000 francs, will be selected from invoices issued by EBMs countrywide. According to Tushabe, the purpose of the awards is to encourage consumers to demand invoices from the EBMs, something that leaves businesses with no option but to use the machines.

“VAT is paid by the consumer, it is your right to ensure that the tax you have paid has been declared by the tax payer so that it can contribute to the development of our country,” the Deputy Commissioner General noted. “If we work together as Rwandans we can reach our target, so we are asking everyone to insist on an EBM invoice.”

Tushabe noted that the campaign will also help the consumer to get in the habit of demanding for an invoice, which can help them in their day-to-day personal lives. “The invoice can also help you to follow up your daily expenses,” he noted.
 

The use of EBMs has proven to be more efficient and reliable in collecting VAT during the pilot phase, and the tax body has set a deadline for each VAT registered business to have bought such a machine.

“The machines help taxpayers keep records when they have made sales. Secondly, the machines also help RRA to track transactions made by taxpayers,” explained Celestin Bumbakare, RRA Commissioner for Domestic Taxes.
  

How the winners are selected 

To ensure transparency, accuracy and fairness, Rwanda Revenue Authority set up a hi-tech, automated no-human-interference system that selects 25 people every week from thousands of invoices. The system, which records every EBM invoice countrywide, has the capacity using specific calculations to select 25 invoices for awards. Unlike other draws, the machine selects 25 invoices from all the invoices that have been issued for an entire week countrywide without any human interference and then makes a list of 25, something that assures accuracy of the method.
 
Gakwerere explains that the system is opened publicly by only one authorized personnel with a code that is designed for that particular draw which is obtained by multiplying the date of the draw with month and the year.

“The system then gives us a report in a PDF format, meaning no one can tamper with it. Secondly, the report comes with invoice number, the date and place at which it was issued and cannot be changed or altered,” he explained. 

Accordingly, the report is published in print and on the RRA website and on radios and televisions, where people cross check to see if their invoices have been selected for the awards for that week.

“So we are asking people to keep their invoices, because it is the only way they can claim their prizes,” Gakwerere noted.

 

 

Source: allAfrica

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‘VAT Machines are killing businesses in Gambia’ – Businessmen complain

 

‘VAT Machines are killing businesses in Gambia’ – Businessmen complain

 

23 January 2014

Local businesses in the Gambia are not the least happy with the recently introduced Value Added Tax (VAT) machines, which were imported into the country by businessman Muhammed Jah’s Quantum net company. Their displeasure is centered around the machines’ “worthiness, lack of reliability and proper maintenance” in the event of system glitch issues. The VAT machines were said to have been imported from Germany. The Ministry of Finance is reported to have spent D36 Million dalasi in purchasing the VAT machines. But the machines are not popular in the market. Business owners said the machine are not that effective and once it is reported faulty, it is hard to get it fixed. This is the machine that the regime uses to calculate VAT sales taxes leveled against consumers and business owners at cash registers.
 
The Value Added Tax was launched in the Gambia, following the amendment of the nation’s Income Sales Tax policy. VAT replaces the Sales Tax, which was being applied in Gambia’s Tax regime. ECOWAS member states are using VAT to regulate Income Tax, but a local business owner in Banjul said the Gambia has purchased the wrong machines to Tax businesses and consumers. The businessman also said he doesn’t trusts the reliability of the VAT machines currently imposed on Gambian businesses.
 

“The VAT machines are forced on businesses while the same taxpayer supply the machines through single sourcing. It was single sourcing. The purchasing of the VAT machines were never channeled through GPPA for fair bidding. The GPPA avoided the provision for fair bidding by awarding the contract to Mr. Jah,” said a Gambian businessman who wished to remain anonymous.

The VAT machines are new to Gambian businesses, whilst other countries haven’t use it for years before accepting the VAT machines. Why is it that the Gambia accepted the machines provided by Mr. Jah without contacting countries such as Kenya, who waited for years before accepting the VAT machines? I don’t think the Gambia is ready for VAT machines. The money that was wasted on this VAT machines could have been used to buy drugs for our hospitals,” he added.

 
The Gambia government purchased one thousand VAT machines from the vendor who was contracted to procure the machines on behalf of the regime. Muhammed Jah of Quantum net was said to have been responsible for the procurement of the machines. Mr. Jah himself could not be reached for comment to state his own side of the story on the controversy surrounding the VAT machines.
 
The Gambia Revenue Authority (GRA) is in charge of Income Tax Administration in the Gambia. The concerned businessman said he is appealing to the President Yahya Jammeh to look into the plight of business owners because the VAT machines is driving many businesses to close their stores.

“Many businesses are closing down because we are not familiar with the machines. Business owners ought to have been properly sensitized about the machines; its operation; usage; and how to facilitate its timely repair in the event the machines are faulty,” said the businessman adding that he has made repeated request in the past to have his VAT machine fixed, but to no avail. He said GRA is collecting millions from business owners and yet they cannot facilitate the timely fixing of the machines.
 

Source: Freedom News, Gambia

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African leaders must seize the initiative on global tax reforms

 

African leaders must seize the initiative on global tax reforms

 

29 January 2014

As leaders gather together at the African Union summit, new analysis from the Institute of Development Studies (IDS) recommends that they must seize the initiative on tax reform and not wait for richer countries to implement proposed changes from last year’s G8 and G20 summits.
 
There remains a great deal of uncertainty around how initiatives on tax set out in the G8 Lough Erne Declaration and the G20 Leaders Declaration will be implemented and whether they will benefit the world’s poorest countries. IDS researcher Professor Mick Moore argues that there is plenty that leaders of poorer countries, and, organisations such as the African Development Bank and the African Union can do themselves to create more effective national tax systems and influence international processes.
 
Professor Moore said:

“The fact that tax is taking centre stage both in terms of the public and political debates is welcome. But moving from rhetoric to reality is where the real challenge lies. Poorer countries can and must seize the initiative on tax reform, and not wait for international processes to be finalised”

 
Professor Moore who leads the International Centre for Tax and Development highlights two key areas where poorer countries can take positive action. Firstly, on tax exemptions, which are particularly prevalent in poorer countries, but universally used and granted to companies to attract new investment. Doubts have been cast around how effective exemptions are in generating new investment and Professor Moore argues that organisations such as African Union, the African Development Bank and the African Tax Administrators Forum should take the lead on developing new international guidelines on their use and effectiveness.
 
Second, poorer countries can boost their own domestic tax revenues by boosting property tax collections and this could be encouraged through the creation of a regional based organisation such as an African Property Tax Initiative.
 
The proposed changes to the global tax system are directed almost exclusively at making more information about the potential tax base available to national tax authorities, more easily and at lower cost. While this is a step in the right direction, the benefits will not be shared equally. Richer countries, the BRICS, and a few other large emergent economies stand to gain the most because their tax authorities have the resources to use more information to reduce tax avoidance and evasion.
 
Professor Moore concludes:

“By taking the initiative and organising collectively at a regional level poorer countries can help create fairer national and international tax systems that suit their needs as well as the needs of the OECD countries and the BRICS.”

 
 
Source: in2eastafrica

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EAC seeks $2m supplementary budget

 

EAC seeks $2m supplementary budget

 

30 January 2014

The East African Community (EAC) has presented a supplementary budget seeking a go-ahead to expend an additional $ 2,143,960 for 2013/14 financial year to meet its programmes. The Assembly also debated and adopted a report of the legal, rules and privileges committee on the assessment of adherence to good governance in the EAC and the Status of the EAC political federation. 

Presenting the supplementary budget request to the House on behalf of the Chair of Council of Ministers, Ugandan Minister of State for EAC Affairs, Shem Bageine, remarked that the supplementary budget would prioritise on three main areas.
 
Out of the specified amount, $ 1,142,763 sourced from USAID, shall be incurred on activities related to Agriculture, Trade and Customs. USD 494, 700 shall be allocated towards the EAC-World Bank Public Financial Management Harmonisation Project while a corresponding $ 506, 497 is expected to be expended to strengthen the East and Southern Africa-India Ocean (ESA-IO) Maritime Security Project. 

Under the USAID Project, the Minister remarked that a total of $ 133,700 would be utilized for implementing the EAC Food Security and Nutrition Policy and developing Regional Animal Resources database at the Secretariat. A second amount of $ 341,150 shall be allocated to a raft of trade activities including facilitating the study of the EAC Common Trade Policy and Strategy, development of the AGOA Framework in all the Partner States and in the preparation of strategies promoting exports to the European and emerging markets.
 
The development of a mechanism for the operationalisation of a Single Customs Territory and the institutionalization of the Revenue Authorities Digital Data Exchange are some of the priorities to be funded under the Customs component of the grant. The stipulated amount is $406,325. The Minister maintained that there was need to ensure harmonization of the procurement, accounting and oversight functions of the EAC as the process to embrace the Monetary Union Protocol commences. The Secretariat is thus expected to support the Partner States in the implementation of International Public Sector Accounting Standards, compliance with the best practices of the Institute of Internal Auditors and in the approximation of legal and institutional requirements, procurement processes and the capacity development requirements.
 
The Chair of the Council informed the House that a specified amount of $506,497 would be used to strengthen the capacity of the East and Southern Africa-Indian Ocean (ESA-1O) Maritime Security project. This is expected to assist the region in the implementation of the Regional Strategy and Action Plan against Piracy and for Maritime Security. In May 2013, the House approved the Budget of EAC amounting to $ 130, 429,394. The theme of the budget is “Consolidating the EAC Common Market and moving towards the Monetary Union.”
 
On its part, the Assessment Report on Good Governance and the status of the Political Federation notes that the EAC has drafted a Good Governance Protocol that incorporates a number of pillars including human rights, transparency, accountability and democracy among others. Discussions are on-going on the Protocol. The Committee gives it a nod but recommends that the EAC should enhance institutional mechanisms to monitor and evaluate adherence to the good governance principles in the Community.
 
On Political Federation, the Report states that the Treaty is not explicit on Political Federation timelines. This prompted the Wako Committee to make recommendations on the Political Federation.

“The Wako Report recommended for an overlapping achievement of integration stages and the fast tracking of Political Federation”, a section of the Report reads.

 

The Report tabled by the Chair of the Committee on Legal Rules and Privileges, Dora Byamukama, terms the purpose of Political Federation as the desire to unite the Partner States into a Federal State with a unified and coordinated political authority. The proposed Federation will be governed by a Federal Constitution that will be negotiated and subjected to a referendum by the Peoples of the Partner States, the Report denotes. The model of the Political Federation, the Report states, shall have a bicameral legislature, a Presidential system of government with an all-inclusive cabinet and an independent federal Judiciary. A number of federal institutions such as a Central Bank, Electoral Commission and Service Commission are also proposed. 

The Committee however observes in the Report that studies in Political Federation show that the rational and vision for political integration need to be articulated afresh. The need to amend the constitutions of the EAC Partner States to allow for Political Federation is also fundamental. The Report terms as fundamental, the need to establish a structure to continuously sensitise on the integration process, in order to eventually achieve a federation that is considered legitimate and people centred. It thus urges the EAC to involve EALA at the Partner State level in the sensitization programmes.
 
The Report sums up by suggesting the commencement of merging of few areas of federal matters and to give timeframe for federating the remaining ones. In order to arbitrate on such matters in future, it also wants the East African Court of Justice to be given extended jurisdiction to handle the matters of federal nature.
 
 
Agencies

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Digital Taxation: It’s happening

 

Digital Taxation: It’s happening

 

31 January 2014

By now, you’ve all probably heard very much about the news that the government plans to implement taxation on digital purchases made from within South Africa. Yes, your government wants even more of your money. It is unfortunately true, and as of April 1, if government gets its way both physical and digital goods you buy online will be subject to the 14% VAT we already pay on everything.
 
This includes thing you buy from Google’s play store, Apple’s iTunes, XBox Live’s marketplace, PSN and yes, even Steam – so you best start getting ready to cough up even more for your games and digital services. What? Digital services too? Yup, things like Netflix, Paypal, Unotelly, or whatever other services you pay for will cost you even more. Want to buy an eBook, or book an online course? Yup, that’ll cost you more too.
 
Here’s a list of everything you’ll be required to pay VAT on:
 
Educational services

  • distance teaching programmes;
  • educational webcasts;
  • internet-based courses;
  • internet-based education programmes; or
  • webinars,

 
Games and games of chance

  • internet-based games, including any electronic game or multiplayer role-playing game;
  • interactive games, such as games of chance, where the result is influenced by the skill of the player;
  • electronic betting or wagering.

Information system services
 
Internet-based auction service
 
Maintenance services
Which refers to technical support relating to

  • blogs;
  • databases;
  • information systems;
  • information system services; and
  • websites.

 
Online content

  • e-books, which means any digitised content of any book or electronic publication;
  • films, which means any broadcast, documentary home-made video, live streaming performance, movie, music video, program, television series, or video
  • images, which means any desktop theme, photographic image, pictorial image, or screensaver,
  • music, which means any audio clip, broadcast jingle, live streaming performance, ringtone, song, or sound effect,
  • software, including apps, system software, or plugins, and any update to these programs.

 
Subscription services
Any subscription service to:

  • blogs;
  • databases;
  • information system services;
  • journals;
  • magazines;
  • newspapers;
  • games;
  • social networking services;
  • webcasts;
  • websites;
  • web applications; or
  • web series.

 

The only way to implement this realistically, is to have it done automatically by banks when you make purchases, or require that services such as Steam comply with Vat regulation, which means they’d need to be registered VAT vendors. Do you really think all of the international companies you buy from are going to register for that? Not a chance in hell; instead, I suspect it just means we’ll be geofenced off from everything. In the end, it’ll mean you may as well say goodbye to the open market on the internet – and hello to a lot more digital piracy.
 
Piracy is driven more by ease of access than cost, and if everything’s blocked, it makes sense that media consumers will look elsewhere for that content.

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South Africa: Government wants to levy VAT on foreign e-commerce firms

 

South Africa: Government wants to levy VAT on foreign e-commerce firms

 

31 January 2014

The government is seeking public comment on how it can levy value added tax (VAT) on foreign companies that sell digital music, e-books and similar services in the local market but do not necessarily have a presence in South Africa. This is according to a notice issued by the Treasury on Thursday. Finance Minister Pravin Gordhan had also mentioned the issue in his 2013-14 budget speech. The Treasury said the call for public comment was being made against the backdrop of international and local efforts to bring cross-border e-commerce (specifically the digital economy) into the VAT regime.

“The current application of VAT on imports does not lend itself to the effective enforcement on imported services or e-commerce where no border posts (or parcel delivery agents, such as the Post Office) can perform the function as collecting agents, as is the case with physical goods,” it said. 

 

The Treasury also said that because such foreign companies were not VAT-registered, South African consumers bought imported digital products without paying VAT. That put local suppliers of digital services at a competitive disadvantage and resulted in a loss of revenue for the fiscus. It said the VAT legislation was amended to bring the digital economy more comprehensively into the tax net and provided for the minister to issue regulations prescribing imported services that would be covered by the new electronic services definition in the VAT Act.

These services would include the supply of e-books, digital music and films, software, images, games and games of chance, information system services, internet-based auction services, maintenance services and educational services, among others. The biggest digital retailers of music, books and films in South Africa are US-based Amazon and Apple’s iTunes service. However, while Amazon has some research and development and a call centre in South Africa, Apple has no physical presence as its computers are sold through a third party. Local e-commerce companies were unfazed by the news on Thursday. Takealot.com CEO Kim Reid said most local e-commerce firms did not compete in the digital services space, but rather in the delivery of physical goods.

“On all those physical goods VAT is paid already,” he said.

Project Isizwe CEO Alan Knott-Craig Jnr agreed, saying consumers would be little affected.

“The issue of taxing the digital services companies comes out of the US and the European Union, areas that do not have a uniform code for the various kinds of sales tax,” he said. “This creates an arbitrage advantage for Amazon and iTunes, but that doesn’t exist in South Africa as VAT is applied uniformly.”

 

Electronic regulatory affairs lawyer Dominic Cull said it would be interesting to see how the Treasury planned to force a company with no physical presence to pay VAT.

“According to current VAT regulations, one needs to have physical address and a local bank account with at least R50,000 worth of invoiced payments in it,” he said.

A Google South Africa spokesperson said:

“We are analysing the draft regulation and will ensure that our business continues to comply with South African law if any changes come into effect.”

Source: Business Day Live

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South Africa: Electronic Services Regulations Published for Public Comment

 

South Africa: Electronic Services Regulations Published for Public Comment

 

31 January 2014

The public has until February 20 to make their input on the National Treasury’s Electronic Services Regulations
 
In a statement on Thursday, National Treasury said the regulations have now been published for public comment. The publication of the regulations follows on Finance Minister Pravin Gordhan’s announcement in the 2013 budget that all foreign businesses supplying e-books, music and other digital services in the country will be required to register as Value Added Tax (VAT) vendors.

“This announcement was made against the backdrop of efforts, both internationally and locally, to bring cross border e-commerce (specifically the digital economy) into the VAT regime. The current application of VAT on imports does not lend itself to the effective enforcement on imported services or e-commerce, where no border posts (or parcel delivery agents, e.g. the Post Office) can perform the function as collecting agents, as is the case with physical goods.”

 

The net result is that the local consumers can buy imported digital products without paying VAT. This outcome not only places local suppliers of digital services at a competitive disadvantage compared to suppliers from abroad but also results in a loss of revenue for the fiscus, noted Treasury.
 
The VAT legislation was amended to bring the digital economy more comprehensively into the VAT net and provides for the minister to issue Regulations prescribing imported services that will be covered by the new electronic services definition in the VAT Act.
  

 
Source: allAfrica

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Why digital tax is good for South Africa

 

Why digital tax is good for South Africa

 

10 February 2014

 
Legal expert Graham Gilfillan welcomed the South African government’s new electronic services regulations which will introduce 14% VAT on digital products and services from 1 April 2014. The regulations have been published by finance minister Pravin Gordhan for comment, and follow the proposals he made in his 2013 budget speech to impose VAT on foreign businesses who “sell e-books, music and other digital goods and services”.

According to Gilfillan the new digital tax is a very good thing. He explained that money from digital purchases often leave the country without any benefit to South Africa’s economy.

“Since when is not paying tax okay,” asked Gilfillan. “This issue of not paying tax on consumer goods is out. It is hurting our economy terribly.” “This is really targeted at the foreign e-sellers, who are killing South African jobs, who are killing South African businesses, because what do they contribute to the economy?”

According to Gilfillan, foreign online shopping has been hurting South Africa, and it is not only about tax.

“Imagine all the South African authors, musicians and software programmers – how do they get their money back?” asked Gilfillan.

 

Increase in money in economy

Gilfillan said that the new digital tax will definitely have a “massive” positive effect on the local economy. He said that many people may be using Netflix or Hulu at the expense of local operations like DStv. The money flows out of the country without any benefits for local artists or content products, said Gilfillan, adding that no royalties are flowing back into the country.
 
Gilfillan said that it is unfair for a foreign content provider to offer products without any tax, undercutting local businesses which have to charge VAT on their products.
 
 
Source: Business Tech

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Tanzania: Despite govt orders, nationwide protests staged over EFDs

 

Tanzania: Despite govt orders, nationwide protests staged over EFDs

 

11 February 2014

Kariakoo market, the busiest in the commercial port city of Dar es Salaam is again at a shut down, only this time traders from cross the country have joined in a nationwide stand off to dispute government ordered use of Electronic Fiscal Devises (EFDs). For Kariakoo, this will be the second time for them to protest against the use of EFDs after doing so on November 18, 2013. Speaking to The Guardian a trader who preferred anonymity said apart from their complaints over the prices of the machines, the systems has a lot of other faults.
 
On Sunday a mass text was distributed among traders urging to close shop because ‘the EFD’s are not friendly to the development of traders instead they aims to kill traders’ capitals.’ However, Kariakoo Business Community (JWK) advisor Johnson Minja said the Community’s leadership is against the protest as they were waiting to meet with President Kikwete for further discussions over the matter. He said that JWK is making efforts to influence the traders to stop the protest until the President meets with them but so they have not succeeded.

“We tried to ask them not to close their shops but they have done their own bidding,” he said “…the business community has nothing to do with it…but we are still trying to influence the traders to open shop until we meet the President,” he added. 

He went on to explain that there is confusion among the traders from two contradicting statements by government officials. First a statement by Finance Minister Saada Mkuya saying all traders are to use the gadgets as of this month, while Minister of Industry and Trade Dr Abdallah Kigoda said that there should be a Commission or task force to go over traders grievances before they are forced to use them.

As in Dar es Salaam, traders elsewhere in the country too are on a shut down. Reports from Songea said that traders have also closed their shops demanding the government first respond to their complaints over the EFDs. In Iringa, businesses were suspended with traders complaining over high taxes and similar ‘faulty equipment’ complaints over the EFDs. Iringa Regional Commissioner Dr Christine Ishengoma urged the traders to stop the protest and continue with business while officials look to resolve their grievances.

Contacted, Deputy Minister for Finance Mwigulu Nchemba maintained government’s stand that the traders are supposed to comply with the law and use the gadgets. He said no one has the right to protest a law enacted by the Parliament noting that, if the traders have complaints, they should present them to the government but not to breach the law.

“There is no one, not the formed commission not the Minister, who can go against the law and stop the use of the machines,” he said “…if the traders think that they have something to say they should air their complaints but not protest the law,” he said. “The Ministry has no other statement, responsible authorities are to go on in collection of Taxes and we will also go on providing education and awareness to the traders and citizens over the operation of the EFD’s,” he summed up.
 

 

Source: IPP media