Effective Implementation of EFDs and their Impact on VAT Administration

Topics Covered Background Preparation For Implementation of EFDs Implementation Strategy Motivation To Taxpayers Impact of EFDS on VAT Administration Challenges Conclusion

Background (Why EFDs) Non-issuance of tax invoices / receipts; (Compliance challenges after introduction of vat in November 2002) Non-issuance of tax invoices / receipts; Maintenance of multiple set of books (parallel records). Over declaration of purchases to reduce VAT payable. Poor reporting of sales from associated / related businesses & branches. Claiming of Non – deductibles. Poor record keeping.

Preparation For Implementation Of EFDs Development of project plan i.e. concept paper and budget. Amendment of the Law and development of Regulations. Development of devices and management systems. Selection of Stakeholders, (manufacturers e.t.c.) Sensitization activities. Development of working documents and manuals. Recruitment of staff. Training for staff and local suppliers’ technicians.

Implementation Strategy Phased approach implementation Phases were based on systems used. 1st Phase- Introduction of ETRs. 2nd Phase- Introduction of EFPs and ESDs. Identification of Pilot sites. Roll out upon successful pilot.

Motivation To Taxpayers Allowed to claim costs of the devices through their VAT returns as part of input VAT. Duty & Import VAT Waiver on importation of devices. These were done to enhance compliance. Claiming was however restricted to devices bought within a stated grace period.

Impact Of EFDs On VAT Administration Growth in VAT collection. Improved record keeping. Easier to estimate VAT due for non-filers. Improved audits as information on sales is handy. Minimized parallel invoicing. Simplified justification of input VAT claims. VAT on Imports has increased.

VAT Collection Before And After

Challenges Delays in awareness campaigns. Unwillingness of Taxpayers to procure EFDs. Unwillingness to populate PLUs. Failure to input Buyers names. Integration of Accounting Systems and POS with EFP/ESD. Absence of SLAs lead to delays in response from stakeholders. Technical challenges with devices (firmware, specifications, hardware issues) despite devices performing well during pilot.

Conclusion Through usage of data generated by the EFDs, MRA will be able to get positive results in revenue growth for both VAT and Income Tax.

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