A Kenyan software company is deploying digital technologies to help eliminate fiscal enforcement drawbacks such as non-compliance and tax fraud in Africa.
Starting with Monrovia, the firm has signed an agreement with the government of Liberia to deploy an Electronic Fiscal Device Management solution (EFDM) that it says will monitor and track transactions and sales records of businesses in the West African state.
Initiated in 2018 by the country’s Ministry of Commerce, the tax management solution is known as ‘Miliki’, and will be operated alongside 20,000 and Electronic Tax Register (ETR) devices.
Liberia Revenue Authority, Commissioner General Thomas Doe Nah said that the introduction of the electronic fiscal device system is a sustainable intervention for the mobilization of domestic revenues for Liberia.
“Tracking sales data of businesses marks the beginning of a more important undertaking to be initiated to promote accountability and enhance revenue collection,” he said.
The solution, he adds, will aggregate sales data from local businesses such as supermarkets, shops, hotels, and other business ventures, seeking to boost revenue collection by promoting accountability and transparency in the filing and payment of General Services Tax in the country.
Chairperson of the National Investment Commission in Liberia Molewuleh Gray said the digital tax project will generate opportunities to augment fiscal monitoring while creating jobs at the same time.
“Miliki will increase revenue collection for the Government of Liberia by improving efficiency in tax administration and entrenching professionalism amongst public and private sector actors and also create thousands of direct and indirect jobs especially for local IT firms to carry out on-site and off-site maintenance services.”
Tracom Services Limited ‘s Managing Director Paul Njau said the project is part of efforts to strengthen enterprise development in Africa by capitalising on its presence in 28 countries across the continent.
“We will implement this technology project to yield the results intended,” he said.
By implementing a digital solution, Tracom’s spokesperson Kamau Kimani sees more optimism for a continent whose tax collection efforts have been plagued by lack of standardization, invoice trafficking, manual tracking, devices lacking data transmission capabilities and non-descriptive sales receipts and invoices.
“There is misuse of approvals of refund claims, a direct link with VAT or annual returns is non-existent while Africa also grapples with the snags of absolute lack of a mechanism to authenticate field transactions,” he noted.
He notes that it has been difficult for the continent to manage taxpayer life-cycle, with many governments struggling to trace purchases creating a loophole for ghost traders and receipts.
“Transaction data is not obtained centrally and some company registrations have forged documents. These are the challenges our solution will endeavour to solve,” stated Mr Kimani.
Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration says that tax administrations, much like tax policy makers, are exposed to rapid change through the digitisation of the economy and the emergence of new business models and ways of working.
“The availability of new technologies, new data sources, and increasing international cooperation are providing new opportunities for tax administrations to better manage compliance, protect their tax base and reduce administrative burdens,” he remarks.
According the International Monetary Fund (IMF), government revenues in the continent average about only 17 percent of Gross Domestic Product (GDP) with Nigeria, for instance, collecting less tax than Luxembourg despite having a population that is 300 times bigger.
The same data shows that if the DRC and Ethiopia shared their tax revenues to citizens, each person would receive less than Sh8,000 per year.
56 percent of those surveyed by Afrobarometer indicates that a rich African is ‘very likely’ to use personal connections or use bribe to evade tax. Official tax records from the Ugandan government on 71 state officials for the year 2013/14 shows that only one had paid personal income tax.
A study of 26 African states done by the Organisation for Economic Co-operation and Development (OCED) published last May shows that tax revenue as a percentage of GDP from 1997 to 2017 is much lower in Africa than in other continents.
“On average, this tax to GDP ratio for those 26 countries was 17.2 percent compared to the OECD average of 34.2 percent and the Latin American average of 22.8 percent,” states the report.
In 2017, Seychelles (31.5 percent), Tunisia (31.2 percent), and South Africa (28.4 percent) had the highest tax-to-GDP ratios of the 26 countries surveyed.
Nigeria (5.7 percent), Equatorial Guinea (5.9 percent), and the DRC (6.6 percent) had the lowest. Kenya scored 18.2, Rwanda 16.0 and Uganda 13.5.