Ritty realized that some of his employees stole money from his business.
Electronic Fiscal Devices (EFDs) have been in Tanzania for about seven years. EFDstrace back its history to James Ritty, a saloon business owner in Dayton, Ohio, USA in the 1870s. Ritty realized that some of his employees stole money from his business.
In 1878, while on a ship to Europe, Ritty saw a machine that counted the number of times that the ship’s propeller completed a revolution. Using the same logic, he invented a cash register he named “Incorruptible Cashier”. The employee was required to ring up every transaction on the register, and when the total key was pushed, the drawer opened and a bell would ring, alerting the manager to a sale taking place.EFDs, essentially, use a similar logic but electronically.
Tanzania Revenue Authority (TRA) describes an EFD as a machine designed for use in business for efficient management controls in areas of sales analysis and stock control system and which conforms to the requirements specified by the laws.Generally, there are three kinds of EFDs current in use in Tanzania. The Electronic Tax Register (ETR), which is standalone EFD for issuing fiscal receipts. The Electronic Fiscal Printer (EFP), is a printer connected to a point of sale (POS) system and it also produces receipts. The third kind is Electronic Signature Device (ESD) which is intended for use by business issuing tax invoices from a computerized system. ESDs donot produce receipts but put a string of alphanumeric characters (a signature) on an invoice.
Despite some success stories for the period spanning seven years of EFDs use in Tanzania, there are still some practical problems that need to be resolved. The tax administration law criminalizes a failure to issue a fiscal receipt by the seller and also a failure to demand a fiscal receipt by the buyer in business transactions.
Both the internet and mobile telephony technologies have brought about new forms of business as well as new ways of doing business. This brings both tax opportunities but also challenges. Imagine the internet banking, mobile banking, and mobile money services.We purchase things like electricity (LUKU), airtime or pay for water bills through the mobile money, mobile banking or internet banking platforms.How could a taxpayer purchasing these kinds of services demand a fiscal receipt? How should a taxpayer support his expenses or VAT claims?Currently, the tax laws provide very little guidance, if any, on these and other similar questions. One solution would be for the tax authority to issue practice notes or guidelines. Can the SMS received when paying for these services be acceptable by the tax authority for tax purposes?
Even for transactions where fiscal receipts are issued, most of them tend to lack some or all of the buyer details prescribed by the law. The law requires receipts to have various buyer details including the name, address, tax identification number (TIN) and also VAT registration number (VRN) if the buyer is VAT registered. Lack of these details creates a fertile ground for tax disputes between the taxpayer who may such receipts to support their expenses or VAT claims and the tax authority who may deny claims of such expenses or VAT claims on the basis that the receipts are invalid.
But is it practical for the sellers to enter buyer’s details in retail transactions?Can the buyers correctly remember their TINs and VRNs? Imagine you are at a petrol station or a super market. Are the ETRs and EFPs designed to capture all those details? Could the EFDsbe made to retrievebuyer’s details from the database of taxpayers at TRA?
Mr Maurus is a partner with Auditax International