Why should you demand a receipt?
The move by tax authority and the government to press business operators in Tanzania to use EFDs appears to have been very successful, at least in the major towns in Tanzania. But there are still some snags.
Last week media reports indicated that the anti-graft body in Tanzania (PCCB) has been monitoring the implementation and use of electronic fiscal devices (EFDs) by businesses in Kariakoo, Dar es Salaam.
PCCB observed a presence of tax evasion by various business operators. Last year, PCCB and TRA issued a joint notice back in 2016 with similar sentiments.
Fraud is still a problem. But there is another problem on the part of customers. It appears that not many customers bother to pick up the EFD receipts (“receipts”) after purchasing their goods and services.
For example, if you have been driving in Tanzania for the past three years, you may have noticed that the introduction of EFDs to the fuel stations also came with one additional container - a dustbin! The pump attendants dump the uncollected receipts into the dustbins. In most of the fuel stations that I frequently refill, it is normal to find the dustbins full of receipts or strings of uncollected receipts hanging from the EFD machines. But as a customer, why should you demand a receipt?
Legal obligation
The law (The Tax Administration Act, Cap 438) require customers to demand receipts whenever they purchase goods and services. So, as a customer, you have a legal obligation to demand a receipt.
This means that you may be penalized if you recklessly fail to comply. Whether you are an individual or an organization. Now that PCCB appears to get more and more interest in the implementation of EFD. This makes your decision not to demand receipt on your purchases even riskier.
Expenses
To persons in business, apart from demanding receipts being a legal obligation, they also have a business interest. The receipts are necessary for them to be able to support their claim for expenses.
The receipts may be helpful in reducing both your income tax and VAT liability. Imagine being audited by TRA four years from now and you need to support certain expenses else pay more tax.
Prevent abuse
Individuals not in business may perceive the receipts just be like any other worthless piece of paper to be dumped or burnt.
This may, partly, make sense because once the EFD receipt has been issued, the details of that transaction are already sent to the tax authority via the EFD management system. And so, whether an individual picks up the receipt or not, doesn’t matter as far as tax evasion is concerned.
But this argument is not entirely correct especially if one considers this in the context of the weaknesses of the EFDs implementation. One of the weaknesses in the implementation of EFD is the lack of customer details on receipts issued by most businesses.
Lack of customer details on a receipt presents a big risk for tax leakage through fraudulent use of the receipts.
The risk is higher when genuine customers do not demand and picks their receipts. How do the fuel retailers or their attendants dispose of the receipts from those dustbins? The same question can be asked for other businesses.
They probably burn them. But burning may not happen if they have someone who can buy the receipts! Customers can help mitigate the fraud risks by building a culture of demanding receipt after purchasing goods or services.
