Electronic fiscal device saga in Tanzania: Understanding issues

 

By Honest Ngowi,The Citizen

In Summary

• The government for its part is losing revenue from transactions that are not taking place when businesses are closed.

The week leading to February 15, 2014 was partly marked by the protest of traders in the country against the use of electronic fiscal devices (EFDs). Businesses were closed in various parts of the country, including very busy Kariakoo shops in Dar es Salaam, Iringa, Songea and Tabora, among others.

The protest against the use of EFDs has many and far-reaching implications for the traders, consumers and the government. While the traders are losing sales and associated profits as well as cash to repay stringent loans, consumers are denied services and wasting valuable time when walking to and from closed businesses. The government for its part is losing revenue from transactions that are not taking place when businesses are closed.

Understanding electronic fiscal devices (EFDs)

The Tanzania Revenue Authority (TRA) describes an EFD as a machine designed for use in business. It conforms to the requirements specified by applicable laws. Its objectives include efficient management of sales and stock control systems. There are various types of EFDs. They include electronic tax register (ETR) that is used by retail businesses that issue receipts manually; EFPs are used by computerised retail outlets. An EFP is connected to a computer network and stores every sale transactions or details made in its fiscal memory and electronic signature devices (ESDs) designed to authenticate by signing any personal computer (PC) produced financial document such as a tax invoice. An ESD uses a special computer programme to generate a unique number which is appended to and printed to every invoice issued by the user’s system.

Users’ obligations

According to TRA, EFD users are obliged to notify any changes/malfunctioning of the devices to the commissioner within 24 hours. The EFD supplier will install, configure and attend the malfunctioning of the machine within 48 hours. Whereas this sounds good, its practicability is questionable. Given the complications that may be involved if users have to report to the commissioner, it would add more value if the malfunctioning was to be reported to suppliers. This is because the suppliers are supposed to have offices in all regions. Reporting to commissioner complicates things between users and suppliers who will have to fix the machine within 48 hours.

Why EFD?

TRA has outlined a number of reasons as to why an EFD is preferred. These include the facts that it has in-built fiscal memory which cannot be erased; it has automatic self-enforcing issuing of daily report after every 24 hours; it transmits tax information to TRA system automatically; it has irreversible date mechanism; it issues fiscal receipts which is uniquely identifiable; it can be used as a stand-alone and configured into a network; it has at least 48 hours power backup, and it can use external battery in areas with no electricity supply; it saves configured data and records on permanent fiscal memory automatically and it has tax memory capacity that stores data for at least 5 years or 1800 day transactions.

A critique to TRA

A closer look at the advantages above indicates these are advantages that TRA stands to get out of EFDs. These are very relevant advantages because the need to enhance revenue collection in Tanzania cannot be overemphasised. However, TRA does not outline direct benefits to traders by using the EFDs. This can be partly the cause of the protest in using the machines. It would add value in efforts to get the protesting traders to use the machines if the advantages to be enjoyed by them were clearly shown as is the case for advantages for TRA.

Issues for traders

There are various issues of concern for traders that trigger protest against the use of EFDs. Prices that range between Sh600,000 to over Sh700,000 are among the issues of concern. Although these will be compensated through tax deduction, understandably traders find it hard to make a one time payment of Sh600,000 for this very important tax infrastructure. They have also complained about what is recorded (sales) and what is not recorded (expenses) by the machines. To compute tax properly, one would necessarily need the two variables. There are many other issues of concern in the EDF debate for traders including the 18 per cent VAT. TRA has responded to some of these concerns at its website. The question is on how many of the protesting traders visit the website.