VAT lottery bears first fruits

 

19 May 2014

Early calculations by state economists show that the real impact of the receipt lottery on the collection of value-added tax will be some €8 million a year, just a fraction of the income that already goes into the state’s coffers. Analysts, however, say that using the lottery to boost tax revenue is secondary to raising awareness of paying taxes and encouraging people to ask for receipts, says Martin Filko, head of the Financial Policy Institute (IFP), which is run by the Finance Ministry.

“Our aim was to spread the idea that it is normal to pay taxes and not to avoid them,” Filko told the press on May 12.
 

The National Receipt Lottery, launched on September 16, 2013, encourages Slovaks to collect receipts from their purchases in shops and restaurants and for services and enter them into a national lottery, with the possibility of winning thousands of euros. So far, nearly 65 million receipts from 450,000 people worth €774 million have been registered.
 
The lottery’s creators, when introducing it in August 2013, said it would curb VAT evasion estimated at hundreds of millions of euros per year, mostly through its educational potential.
 
In addition to encouraging people to ask for receipts, the lottery helps to reveal fraudulent practices among entrepreneurs. If customers cannot register a receipt from a shop or vendor, they can file a motion with the Financial Administration (FA), which will inspect the premises and its cash register. The number of such motions increased from 298 between March and August 2013 to 5,765 between September 2013 and April 2014, according to data the FA provided to The Slovak Spectator.
 
Patrícia Macíková, spokesperson for FA, said that fewer entrepreneurs are trying to skirt the law on the use of electronic cash registers.
 
By issuing a valid receipt, entrepreneurs confirm that they are running their business honestly and that they are not trying to deceive their customers, Rastislav Čépe, spokesperson for Tipos, the state-run company that runs the lottery, told The Slovak Spectator.
 

Lottery as a supportive measure

 
According to Filko, it is very hard to assess the benefits of the receipt lottery on VAT collection. The state imposed several measures to fight tax evasion that contributed to an annual increase in VAT revenues by €289 million in 2013. This may be the result of a combination of these measures, Filko explained.

“The lottery is, first of all, a successful popularisation tool, which massively promotes other very successful tools that improve tax collection in Slovakia,” Filko added.
 

The first estimates, which the IFP based on comparing the increase in sales of retail trade and restaurants in the third and fourth quarter of 2013, show that the receipt lottery could contribute some €7-8 million a year. This may, however, change when the IFP receives more information.
 
Matúš Pošvanc, an analyst with the F. A. Hayek Foundation, also considers the lottery a supplementary measure that will “discourage some entrepreneurs from avoiding taxes”.

“The effective measures in the area of tax collection should aim to fight against big [tax] dodgers,” Pošvanc told The Slovak Spectator.
 

How to “play”

 
To register a receipt with the national lottery the purchase has to be at least €1, and the receipt cannot be older than two months. 

Most of the receipts registered before April were issued by retail stores, especially big retail chains, followed by wholesalers (excluding motor vehicle repair), accommodation and food services. The most receipts per capita were registered in Košice Region (42 per person in one drawing), while the fewest were registered in Prešov Region (21 per person in one drawing), according to the IFP report.

 
Some retail and service providers enter the receipts to the lottery automatically (the list can be found at the lottery’s website), while other receipts must be registered via the internet, mobile phones or at Tipos booths.
 
Each receipt entered has three chances to win. The first drawing takes place every 14 days with the winning sums ranging from €10,000 for the first prize down to €100 for the 10th. In total, €20,000 in prizes can be won in one drawing. The so-called second-chance drawing occurs every 28 days, with eight winners drawn, one from each of Slovakia’s regions. Winners receive a cash prize of €10,000 or goods worth the same value. Lottery winnings are not subject to taxation, according to the lottery website.
 
As of December 2013 there is also the third-chance drawing, which occurs every 28 days, with 150 winners and 150 stand-ins. Unlike the previous drawings, participation in this one is not automatic and people have to re-register. Those whose names are drawn then attend a TV show in which they can win various prizes. One person drawn during the show will win an extra prize worth several thousand euros, the lottery website reads.
 

Future plans

The highest number of receipts was registered in the very first drawing: more than seven million by about 252,000 people. Since then the number of receipts and participating players, gradually decreased and has stabilised at about three million receipts, Filko said.
 
Pošvanc assumes that the lottery’s popularity will decrease slightly. Because of the upcoming election years the government will spend more money, which may discourage people, as the state debt will probably not decrease, he explained.
 
To improve the effects of the lottery and increase the number of participating sellers, especially smaller ones that are more likely to dodge taxes, the IFP is proposing several measures. One of them is to offer new products that will increase the attractiveness of registration of receipts from small premises in retail and restaurants, for example through increasing the value of prizes in the second-chance drawing. The IFP also suggests registration of invoices which are mostly used in transactions in services. It, however, faces many technical problems, Filko said.
Another proposal calls for more effective and more analytically sophisticated use of information on non-registered cash registers that people send to the FA.

“This is something that may contribute to better collection of taxes in Slovakia the most in the future,” Filko said.

   

Source: Slovak Spectator

Uganda: URA, KCCA in partnership to collect revenue

 

The Uganda Revenue Authority (URA) and Kampala Capital City Authority (KCCA) have signed a memorandum of understanding for collaboration in collecting city revenue.

URA commissioner general Allen Kagina and KCCA executive director Jennifer Musisi signed the agreement at the URA offices in Kampala.
 
Kagina said the agreement is meant to formalise the partnership in order to increase revenue collection for the two authorities.
 
She said the agreement will help URA collect more revenue, especially from construction business. She explained that KCCA gives application permits to people putting up structures and enforces payment of licenses. 

“URA’s role of revenue collection will be specified. There are some construction projects taking place in the city that we are not aware of. However, KCCA which issues the application permits, can avail URA with that information so that revenue is collected,” Kagina said.

 

She explained that URA and KCCA have been working together to issue trading licenses and analysing revenue collection in the city, but will now exchange information for mutual benefit.

 
Musisi said the agreement will help in saving resources by exchanging information. She added that the two authorities are looking at higher levels of capacity building and exchanging of ideas, which will help transform the city.
 
About two months ago, URA, KCCA and the Uganda Registration Services Bureau announced their intention to work together to boost revenue collection and stem tax losses in the city by netting tax evaders.
 
The three bodies said a tax payer registration expansion would be implemented in all divisions of the city.
 
This came amidst reports by KCCA that some members of the business community were forging trading licenses to evade taxes.
 
 
Source: The New Vision

 

African Tax Collections Grew By 1.6 Percent Of GDP In 2012

 

22 May 2014

The Organization for Economic Co-operation and Development has released a new report advising African nations on how to boost their tax revenue collections to foster sustainable development.
 
Strengthening domestic resources offers an antidote to aid dependence and enables countries to take ownership of their development and growth agenda, the report, entitled African Economic Outlook 2014, said.
 
In 2012, low-income African countries on average collected tax equal to about 16.8 percent of gross domestic profit (GDP). This is below the minimum level of 20 percent considered by the United Nations as necessary to achieve the Millennium Development Goals, a set of eight five-year international development goals established by the United Nations in 2000, which include the eradication of extreme poverty.
 
Lower-middle-income African countries fared a little better, with an average tax burden of 19.9 percent of GDP in 2012, the OECD said. With an average tax burden of 34.4 percent in 2012, upper-middle-income countries came closer to the average in OECD countries of 35 percent. In comparison, in 2000, the tax burden equaled 12.6 percent, 20.9 percent, and 28 percent, respectively, for each of these income levels. For Africa as a whole, the tax burden stood at 26 percent of GDP in 2012, up from 24.4 percent in 2011.
 
According to the report, total collected tax revenue in Africa has increased four-fold since 2000, from USD137.5bn, to a record USD527.3bn in 2012. Natural resource-related tax revenue largely underpinned this strong increase.
 
The report highlighted a number of challenges that many African countries must overcome to increase tax revenues further. One of these is the shallow tax base in most African economies due to weak tax administration capabilities. Collections are particularly low from small businesses and farming activities due to a large informal economy, the OECD said.
 
Also, the tax base can be further eroded by competition for investment between African countries. The report noted that ineffective tax incentives are no compensation for a poor investment climate and may actually damage a developing country’s revenue base, eroding resources for the real drivers of investment decisions: infrastructure, education, and security.
 
A further challenge is posed by the need to develop effective transfer pricing and information exchange regimes, the report said.
 
 
Source: Tax News

Ethiopia: ERCA Collected 79 Billion Birr during the Past 9 Months

 

22 May 2014

A report released by the Ethiopian Revenue and Customs Authority (ERCA) on Monday, May 12, 2014, has unveiled the authority has failed its target of collecting 88.3 Billion Birr by only collecting 79 Billion Birr during the past nine months of the fiscal year.

However, when compared to the same period of the last fiscal year ERCA’s performance has shown an increase by 27 percent. Addis Ababa takes the lead in collecting the highest amount of revenue, 10.7 Billion Birr.
 
On the other hand, out of the total 79 Billion Birr the highest revenue came from indirect taxes. Indirect taxes accounted 72.3 percent or 56.3 Billion Birr of the total revenue. Second highest revenue source were export taxes. The Authority collected 34.5 Billion Birr from export taxes. And this made up 43.5 percent of the revenue. The remaining 21.5 Billon Birr came from direct tax.
 
With regard to goods smuggled out of Ethiopia, the report revealed the Authority managed to prevent commodities that are worth 23.4 Million Birr from being smuggled out. The commodities that were caught include livestock, khat, coffee, gold, silver, cereals, vegetables and fruits.
 
Out of the smuggle goods most was siezed at the Bahir Dar checkpoint. The total amount of commodity caught at this checkpoint was worth 14.3 Million Birr. And in relation to contraband, ERCA’s Hawassa Branch Office has intercepted contraband that is worth 64.87 Million Birr. This takes the largest portion of the total contraband intercepted.
 
The report also indicated cash register machine use stands at 19,452 while it aimed for 37,440 tax payers to use the machine. The report has also included the Authority’s employee turnover report. During the past nine months it has hired 2,046 new employees and fired 122 employees, 1,502 employees have also quit on ERCA. And with regard to suits that the Authority is a party to, the report showed it has sued 2,949 individuals for tax fraud and contraband. In addition to this, the report said the Authority has won 85 percent of criminal trials and 97.25 percent of civil cases.
 

 
Source: Fortune

Nigeria: Multiple Taxes – Cross River Deploys ICT for Revenue Collection

 

26 May 2014

Senior IT. Correspondent Local government areas in Cross River State have introduced payment of levies through Point of Sale terminals in market places so as to curb multiple taxation and thefts by tax collectors. The move, a joint effort between the state government and the Growth Employment in States, also known as GEMS3, will boost revenue generation.
 
GEMS3 programme is a partnership between the Federal Government and the UK Department for International Development, designed to ease business transactions in Nigeria. The initiative is currently undergoing test-running in Calabar Municipal Government, Calabar South, Ikom, Obubra, Yala, Boki, Akpabuyo and Ogoja local government areas. Addressing shop owners and markets women at Ika-Ika Oqua and Akim markets, Chairman, Calabar Municipal LGA, Donatus Etim, said payment of levies through PoS would eliminate the problem of multiple taxation. He said a bye-law, No 001/2004, introduced by the council, had given legitimacy to the initiative. 

Etim said the campaign was aimed at creating awareness on the existence new bye-law and the harmonised levies to be paid through the PoS.

Continuing, he said, “this is to avoid traders and market women from falling prey to the antics of touts and erring council revenue officials who come to the markets to collect multiple levies from shop owners and market women.”

 

The Programme Coordinator of GEMS3 in Cross River State, Geraldine Oku, said her agency was working with the state government and the nine LGAs to eliminate multiple taxes and ensure conducive business environment for all citizens, especially women and the poor.
 
 
Source: Daily Independent (Lagos)

Nigeria: VAT Difficult To Measure -FIRS Boss

 

4 July 2014

ABUJA – Alhaji Kabir Mashi, Acting Executive Chairman, Federal Inland Revenue Service (FIRS), said it was technically difficult to measure Value Added Tax (VAT) in the financial service sector.  Mashi made the assertion at a seminar on VAT in Financial Service Sector, organised by the African Tax Administration Forum (ATAF) in Abuja.

Mashi, represented by Mr. Osy Chike, Coordinating Director, Modernisation Group, FIRS, said that tax treatment of financial services was the most debated both in economic theory and in applied tax policy. According to him, it is not surprising that most countries exempt financial services from VAT due to the fact that it is technically difficult to measure the value added in financial services transactions.

Mashi said that the reason for the debate was the characteristics of financial services, which tended to allow the object of a financial transaction to undergo rapid changes over time.

Another reason, according to Mashi, is the strategic role that financial instruments play in facilitating the process of value delivery by counter parties in daily transactions.

“It is noteworthy to mention that the financial sector in most African countries is expanding rapidly and undergoing significant reforms. The reforms are improving service delivery and bringing on new financial products, services and intermediation architecture,” Mashi said. 

He also expressed the hope that the seminar would discuss and share country experiences as well as making mutually helpful recommendations on the application of VAT in financial services in Africa. He identified lending, deposit-taking, electronic banking, agency services, advisory and consultancy services, trading in shares, bonds and foreign exchange as areas of concern of ATAF.

Contributing, Mr Kennedy Onyonyi, Director, Institutional Development, ATAF, said that VAT was a very important aspect of tax. He added that ATAF would give it due attention owing to its revenue generating potential. Onyonyi said that was most problematic to measure VAT in international trade owing to its potential for double taxation.

He said that the forum would ensure some element of uniformity among African countries on VAT to enable them align their statutes with global standards.

Onyonyi said that the seminar was organised based on needs assessment on areas to address the needs of members of VAT in financial services. He said that ATAF was committed to capacity building through various activities such as seminar as well as technical events on tax treaties and excise duties in the continent.

“We are facilitating capacity building to help our members carry out tax administrative reforms that would be beneficial to them,” he said.

Source: Nigerian Observer News

Rwanda: RRA eyes wider tax base

 

5 August 2014

The Rwanda Revenue Authority (RRA) has launched the 13th Taxpayers’ Day celebrations with a promise to widen the country’s tax base. The Tax payer’s Day showcases the contribution of taxpayers to national development.
 
The celebrations under the theme: “Invoicing: A basis for taxation and a foundation for Book keeping”, is an opportunity for RRA to display various trade facilitation and communicate prospects to spur business development by providing desirable services, according to RRA’s Drocelle Mukashyaka, the Deputy Commissioner for Taxpayer Services Department.

“This year RRA is planning to engage various leaders at different levels in a dialogue on taxation and self-reliance with view to increase partnership in revenue mobilisation and, at the same time, publicly appreciate all those that were exemplary as far as tax payment and mobilisation are concerned,” Mukashyaka said at the launch yesterday.

 

Taxpayer’s Day is an annual event that was launched in 2002 through as a platform for raising taxpayer’s awareness.
 
This year’s celebrations will be taken to various districts across the country with the national celebrations slated for August 30, in Kayonza District. The best taxpayers will be recognised during this celebration.
 
Meanwhile, speaking at the same event, RRA’s Commissioner General, Richard Tusabe, said the revenue body will continue expanding the country’s tax base to meet its targets.

“RRA will continue engaging various stakeholders at different levels in a dialogue on taxation and self-reliance aimed at increasing partnership in revenue mobilisation, the target is realistic but requires concerted effort from all stakeholders,” Tusabe said.

Revenue performance

The revenue performance (tax and non-tax revenues) for July 2013 to June 2014 stood at Rwf769bn against the set target of Rwf793.2bn, figures from RRA indicate.

“The performance indicates an achievement of 96.9 per cent,” Tusabe said.

He said revenue collection during July 2013-June 2014 grew by 15.9 per cent with total tax revenue collection amounting to Rwf758.6bn short of the target of Rwf782.5 billion. 

Widening tax base

As a way of ensuring that RRA achieves its set targets, Tusabe said the revenue body will seek to enhance Value Addition Tax (VAT) invoicing operations. We will continue to enforce the use of Electronic Billing Machines (EBMs), in Kigali and other cities and towns across the country, he said.
 
He noted that so far a total of 5,154 taxpayers out of expected 6,896 have acquired EBMs.
 
RRA announced a number of measures by which it seeks to bolster tax collections, including working with the local government to ensure all traders are registered with the tax administration.
 
The tax body also plans to improve the collection of local government taxes by investing in modern technology that will assist in having a reliable database for collection, audit and enforcement.
 
Other measures include continuous enhancement of various initiatives aimed at improving service delivery and business environment including expanding usage of e-services for filing and payment of taxes, enhancing implementation of the electronic window system, and rolling out the gold card scheme in customs.
 

 
Source: The New Times, Rwanda.

Rwanda Govt agencies blamed for tax collection shortfall

 

19 August 2014

The Rwanda Revenue Authority (RRA) recorded Rwf759.8 billion in total tax revenue collection during the July 2013-June 2014 fiscal year, which was short of the targeted Rwf782.5 billion. This, it has emerged, could be partly because some budget officers in public institutions have not been remitting taxes collected from civil servants on behalf of RRA, contrary to standing guidelines.

According to Richard Tusabe, the RRA Commissioner General, many government institutions budget managers do not submit tax collections and neither can they account for the money. He, however, declined to say which government agencies had not remitted the taxes.
 
The tax body chief attributed this laxity to negligence or corruption tendencies among budget officers. This was one of the many challenges RRA cited as having a huge blow on their annual tax collections targets during a government officials’ tax dialogue last week in Kigali.
 
Tusabe told participants that they would remind budget managers of their obligations.
 
According to the recently-released Auditor General’s report, a total of Rwf2.7 billion deducted in taxes by government agencies was not remitted. This represents an increase of Rwf2.65 billion compared to Rwf52.3 million registered in the 2012/2013 financial year. Taxes that were not deducted amounted to Rwf592.1 million compared to Rwf564.6 million over the same period.
 
Dorcelle Mukashyaka, RRA deputy commissioner general, said all government budget officers were well aware of their responsibilities, adding that though RRA has carried out numerous trainings for budget managers in government institutions, the problem has persisted.
 
According to the report, taxes that were deducted, but not remitted to RRA include Pay As You Earn (PAYE) amounting to Rwf2.22 billion, while Rwf214.1 million was not deducted at all. 

Value Added Tax totalling Rwf77.2 million was not deducted from suppliers, while Rwf15.4 million was deducted but not remitted to RRA by some entities, it indicated. About Rwf2.2 million was not deducted as 3 per cent withholding tax from suppliers while Rwf1.9 million was deducted, but not remitted to RRA by some agencies. The total sum of Rwf83.7 million was never deducted as 15 per cent withholding tax from service providers.

“The concerned people should answer why they don’t remit the money because the law clearly states that they should deduct and declare to RRA,” Mukashyaka explained.

Nelson Ogara, a senior manager at PricewaterhouseCoopers Rwanda, said failure to remit the taxes to RRA impacts on the economy.

“If the money supposed to be spent by the government is not collected, this creates avoidable shortfall,” he said.

He added that if the money remains on the government treasury account, it would not be used as required to support Rwanda’s economic growth.

 
The other challenges facing RRA include resistance to use electronic billing machines and online tax payment facilities, a large informal sector, ‘hard to trace’ cash transactions, smuggling and tax evasion.
 
Source: The New Times

Billing Machines Increase Tax Collection By 16%

 

8 September 2014

Barely six months after the introduction of Electronic Billing Machines, Rwanda revenue authority (RRA) says the results are impressive. Speaking at this year’s tax payers’ day celebration on Saturday, the commissioner general of RRA, Richard Tushabe, said the machines are helping the government increase its tax base. The commissioner also said the tools have helped cut down time spent screening books of accounts.

“Auditors used to spend hours investigating and going over massive documentation, but with the EBM, audits are easily conducted,” he said.

 

Tushabe also said RRA is now able to catch tax evaders with less effort. The same technology is used in countries such as Sweden, Germany, Greece, Ethiopia and Kenya to combat tax evasion.
 
More than 6000 traders have installed the machines and RRA expects more than 1000 traders to install the machines soon. Every registered machine records all transactions and indicates Value Added Taxes expected to be remitted to government coffers. Only businesses with a turnover of at least Rwf 20m (USD 29,000) per year are obliged to use billing machines. Those who don’t are penalized.
 
RRA predicts an exponential increase in tax collections at the end of the current financial year. Last year’s domestic revenues to the budget was Rwf782.5 billion equivalent to 62%. In financial year 2014/15, collections are projected at Rwf906.8 billion, increased by 16% from last year.
 
Meanwhile tax payers’ day was celbrated in Kayonza Distrcit, Eastern Province. The Prime Minister, Anastase Murekezi, who presided over the lemony requested Rwandans to fulfill their tax obligations and help the country get rid of dependency on foreign aid.
 
Bank of Kigali was recognised as the overall tax payer.
 
 
Source : KTPRESS

Slovakia: How To Catch Tax Dodgers With a Lottery

 

15 September 2014

Slovakia has a VAT gap because too many businesses are not paying the tax money they owe.
 
Slovakia’s solution to its VAT problem is a lottery. By sending in or registering a sales slip online, consumers can win a car, cash, or an invitation to be a contestant on the Slovakian “Price is Right.” (For the Macedonian VAT lottery, it is a house!) Once the government has the sales slip, it can see what the retailer owes in taxes.
 
So, where are we going? To the amazing gap in Value Added Tax receipts in the eurozone.
 
Sort of a distant relative of the sales tax, the VAT is a consumption tax. For a pretzel, if we levied a VAT, as with the sales tax, our pretzel would have a higher price at the cash register. But with a VAT, that elevated price is based on the value that is added to the product at each production stage, At the last stage, because businesses pass it along, the consumer covers the full VAT payment. (Sounds simple but the economics are much more complex because of the incentives.)
 
To go after the tax dodgers, Slovakia just needed to know that was happening at the cash register. Suddenly, businesses are being asked for receipts by customers who never cared about them. Having collected 64 million receipts since September 2013, the government says the lottery has been a huge success.
 
Our bottom Line: VAT Gaps
 
You can see below that Slovakian VAT gap is large. They are missing 37% of what they should have collected. As we might expect, with 39% less than what they should be collecting, Greece also has a gargantuan VAT gap. By contrast, Germany, at 13%, does not. Our bottom line? The VAT gap is further evidence of the vast fiscal discrepancies in the eurozone countries.
 
 
Source: econlife