The Sunday Mail
Business Editor
TEN days from now Tanzania’s taxman, Tanzania Revenue Authority (TRA), expects consumers to demand fiscal receipts for everything they buy “even if it is beer, a soda or a needle”, as the second phase of fiscalisation kicks in.
Already, the first phase has been completed.
Unfortunately, the project has remained largely abortive in Zimbabwe despite Government making fiscalisation legally enforceable by gazetting Statutory Instrument 104 of 2010 on June 8, 2010.
In particular, the legal instrument requires all companies whose annual turnover is more than US$240 000 (Value Added Tax category C), to record their sales using electronic fiscal devices.
Fiscalisation essentially entails introducing electronic fiscal devices (EFDs) — machines designed for use in businesses for efficient management controls in areas of sales analysis and stock control system — such as electronic tax registers (ETRs), electronic fiscal printers (EFPs) and electronic signature devices (ESDs).
In essence, these devices are designed to capture all sales information and automatically re-route it to the tax authorities who in turn are able to see how much they are owed by companies.
TRA is generating much of the oomph needed to drive the project to its logical conclusion from the encouraging increase in revenue generation since it began the policy in 2010 — ironically the same time that Zimbabwe began its own fiscalisation project.
The Authority observes that tax collection improved by 9,6 percent between 2010 and 2011 and 23 percent for 2011 to 2012.
Due to the expanding use of the electronic tax register, TRA now expects to collect US$370 million (600 billion shillings) a month, up from the current US$250 million (400 million shillings).
The Zimbabwean Government believed that local revenue collection would inevitably improve by configuring fiscal devices to enable them to record sales and other tax information on the read-only fiscal memory at the time of sale for use by the tax authorities in Value Added Tax (VAT) administration.
However, market watchers say that the Zimbabwe Revenue Authority (Zimra), which is the lead agent in implementing the process, has been lethargic, a development that has stagnated the process.
Last week, a Harare-based tax consultant, who preferred to remain anonymous, said that although the project was launched four years ago, currently there is no system to connect organisations to the proposed Zimra database.
“There is no system to connect organisations to the proposed Zimra database in line with Clause 4(d) of SI 104 / 2010. The project has stagnated and not all registered VAT operators have complied with fiscalisation.
“This is against the backdrop of massive Government spending estimated at around US$10 million in VAT rebates for companies that complied with the law.
“Small to Medium Enterprises, which have been cited as not contributing to the fiscus, should naturally be included in the next phase of fiscalisation. However, this is not possible due to the current pedestrian state of the project. Zimra does not appear to be too keen to move to the next phase,” said the expert.
There are suspicions in the market that some Zimra bosses might have been “influenced” to maintain the status quo by a powerful clique of business lobbyists that is benefitting from evasions.
This has, however, never been proved. Some sections question why there has been lethargy in implementing the project especially after Zimra’s board chairman Mr Sternford Moyo confirmed that fiscalisation had improved compliance and contributed to the good performance of VAT collections for the year ending December 31, 2012. In fact, he noted that, “to some extent, fiscalisation levelled the playing field for large operators thereby improving compliance”.
Zimra Commissioner-General Mr Gershem Pasi conceded last week that the Authority’s system is yet to be connected to retailers.
He said the project will resume during the third quarter (between July and September) of the year.
“The technology that we had identified was not really appropriate and was costing more to convert it to be compliant with the computerised system, so we are reviewing that and we will be coming up with a more user friendly system soon. We are almost through the scoping. . .
“When we started the project, the authority had not been enabled to receive data from the machines, we did not have the capacity and that is the capacity which we are now putting in place.
“But what we are doing is revising the approach so that when we re-launch the thing it will be a much faster project. We are doing a pilot project and we have not decided on the exact number but we have about 50 units so that we just have a plug-and-go scenario. We are doing our own backbone, those gadgets must talk to us, at present we have them all over but they do not have connectivity with us,” said Mr Pasi.
Local industry bodies have, since the beginning of the project, been strenuously resisting its implementation, arguing that the gadgets, at a cost of between US$600 and US$3 200 per unit, would weigh down small businesses.
Big retailers such as OK Zimbabwe and TM Supermarkets, however, grudgingly complied.
The Sunday Mail Business understands that companies that particularly rely on van deliveries such as Delta, Innscor, Schweppes, Ingwebu and Mutare Bottling Company have unreservedly adopted the devices inorder to buttress their internal control systems.
Untapped informal sector
Experts believe that it is imperative for Zimbabwe, which is grappling to tap into the informal sector, to expeditiously implement the project.
Most of the small to medium scale enterprises remain outside the tax bracket.
Government, through the Ministry of Small to Medium Enterprises and Co-operative Development , estimate that there is more than US$7,4 billion that is circulating outside the mainstream economy.
The Bankers’ Association of Zimbabwe announced a fortnight ago that it had launched its own independent economic survey to try and quantify the size of the informal economy and to gauge how much is circulating outside the formal banking channels.
In 2011, a study conducted by the African Forum and Network on Debt and Development (AFRODAD), a non-governmental organisation, railed against the Zimbabwe Revenue Authority (Zimra) for failing to effectively monitor business transactions.
In countries such as Tanzania and Kenya, fiscalisation is considered as an effective method to deal with tax evaders.
What has been even more worrying has been Zimra’s lethargy in introducing the electronic cargo tracking systems (ECTS) despite the fact that the country has local companies that are capable of supplying these systems.
In the 2010 National Budget, Treasury mulled introducing the ECTS on April 1, 2010.
Government had identified transit cargo as a high risk to revenue security since it constitutes a significant volume of customs transactions.
The bulk of such cargo remains un-acquitted.
Through a system of electronic seals and transmitters, the ECTS are designed to monitor transit cargo because there was belief that cargo purportedly destined for other regional countries was being offloaded on the local market; hence, evading duty in the process.
But Kenya, East Africa’s biggest economy, which started the project just about the same time as Zimbabwe, has since completed it.
THE TANZANIAN EXPERIENCE
The Electronic Fiscal Device (EFD) was introduced to VAT registered traders under the “The Value Added Tax (Electronic Fiscal Device) Regulation, 2010” – Subsidiary Legislation, Government Notice Number 192 published on May 28, 2010, and enshrined in the Finance Act 2010.
It was mainly designed to enhance VAT compliance in Tanzania.
TRA is targeting more than 200 000 taxpayers that have been evading the authorities.
Similarly, the initiative has been met with stiff resistance from business.
In February, businesses were closed in various parts of the country, including the very busy Kariakoo shops in Dar es Salaam, Iringa, Songea and Tabora, among others. They claimed that they could not afford to buy the devices.
TRA Director for Education and Taxpayer Services Mr Richard Kayombo was recently quoted in the Tanzanian Press as saying it is now imperative for consumers to ask for fiscal receipts even for the purchase of a needle.
“We are now embarking on the massive campaign for people to demand receipts for anything they buy. Even if it is a beer, a soda or a needle worth 10 shillings, get the receipt . . .
“We ask Tanzanians not just to demand receipts, but to make sure they are ETR receipts and they depict the correct amount paid,” said Mr Kayombo.
Businesses that do not issue ETR receipts will risk being fined $1 900 (three million shillings) on the spot or twice the amount of the tax evaded, whichever is greater.
UNDERSTANDING ELECTRONIC FISCAL DEVICES
An electronic fiscal device (EFD) is a gadget designed for use in business for efficient management controls in areas of sales analysis and stock control.
Types of Electronic Fiscal Devices (EFDs)
· Electronic Tax Register (ETR)
Is often used by retail businesses that issue receipts manually.
· Electronic Fiscal Printer (EFP)
Is used by computerised retail outlets. Connected to a computer network and stores every sale transactions or details made in its read-only fiscal memory.
· Electronic Signature Device (ESD)
ESDs authenticates personal computer produced financial documents such as tax invoices. It uses a special computer programme to generate a unique number that is attached and printed to every invoice issued by the user’s system.
