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Research Report on
Introduction and Adoption of Electronic Fiscal Devices (EFDs) by the Business
Community in Tanzania: Lessons Learned, Opportunities and Challenges for
Dialogue Process
Submitted to:
The Centre for Policy Research & Advocacy (CPRA)
University of Dar es Salaam Business School (UDBS)
By:
Dr. Siasa Issa Mzenzi1, Dr. Mariam Nchimbi, Dr. Deogratius Mahangila, Mr.
Said Suluo, and Mr. Simon Edward
Department of Accounting
University of Dar es Salaam Business School (UDBS)
Dar es Salaam, TANZANIA
April 2016
1 Contacting researcher: [email protected]
i
Acknowledgement
This study was funded by BEST-Dialogue through the Centre for Policy Research &
Advocacy (CPRA) of the University of Dar es Salaam Business School. The authors
are very grateful to these institutions. We also thank our respondents who spent their
valuable time answering our questions. Furthermore, we are grateful to the University
of Dar es Salaam for giving us research clearance. However, the views expressed in
this research should not be attributed to these institutions.
ii
Executive Summary
Objective - This study was aimed at obtaining an in-depth understanding of the
adoption and implementation of EFDs by the business community in Tanzania. In
particular, this research aimed to achieve the following objectives: (1) To analyse the
mechanisms and/or processes used to adopt EFDs and assess their impact and/or
influence on the level of compliance by the business community in Tanzania (2) To
analyse the challenges of using EFDs and the methods used by the business
community to channel their concerns; and (3) To identify opportunities and
challenges of the dialogue process.
Methodology – This research was conducted using mainly qualitative inquiry. Three
main sources of data were used, namely, documentary sources, in-depth interviews
and observation. The collected data was analysed using the qualitative approach
recommended by Strauss & Corbin (1998).
Findings –The findings generally show that the mechanisms used to adopt and
implement EFDs were inappropriate. This was mainly attributed to the failure of the
responsible officials to actively involve all major stakeholders in the process. As a
result, the adoption and implementation EFDs in both phases faced a number of
challenges, including (1) the high cost of EFDs (2) network problems (3) poor quality
of paper rolls (4) the location of approved EFD suppliers (5) poor quality of EFDs and
weak batteries (6) the lack of provision of an after-sales service (7) compatibility
issues (8) limited technical functions and lack of technicians (9) the reluctance of
traders to use EFDs (10) limited implementation and coverage of EFDs and (11) weak
enforcement of EFD-related laws and regulations. Since appropriate platforms for
dialogue were unavailable, in most cases, traders used protests to communicate these
challenges. In this regard, the adoption and implementation of EFDs created the
following opportunities for the dialogue process: (1) debate on the appropriate public
finance and taxation policies (2) appropriateness of EFD-related laws and regulations
(3) debate on how the noted challenges can be addressed (4) the role of the media in
influencing the usage of EFDs (5) debate on the appropriate platforms for discussing
matters relating to EFDs and (6) debate on the roles and responsibilities of the various
stakeholders. However, these opportunities may face the following challenges: (1) the
absence of reliable dialogue platforms (2) the possibility of attracting a low number of
participants (3) difficulty in reaching a consensus on major contentious issues (4)
failure of the responsible parties to implement the agreed resolution and (5) the
possibility that the dialogue may consume too much time and money. Thus, it is
important to institute reliable dialogue mechanisms to address the noted challenges.
Practical Implications – The findings indicate that EFDs could potentially increase
tax revenue collection when implementation challenges are adequately addressed.
Originality/value – Most studies on EFDs have focused on developed countries; this
is one of the few qualitative studies which focused on an emerging economy
(Tanzania). Also, unlike the previous study by TCCIA&PAMOMA (2012), which
focused on VAT-registered traders only, this study involved both VAT and non-VAT-
registered traders.
Keywords: EFDs, tax compliance, tax administration
iii
Table of Contents
Acknowledgement .......................................................................................................... i
Executive Summary ....................................................................................................... ii
Table of Contents ......................................................................................................... iii
List of Tables ................................................................................................................. v
List of Figures ................................................................................................................ v
Acronyms ...................................................................................................................... vi
1.0 Introduction ......................................................................................................... 1
1.1 Background Information ........................................................................................... 1
1.2 Research Objectives .................................................................................................. 2
2.0 Research Methodology ....................................................................................... 2
2.1 Methodological Approach ......................................................................................... 2
2.2 Data Collection and Analysis .................................................................................... 3
3.0 Findings............................................................................................................... 4
3.1 Adoption and Implementation of EFDs in Tanzania ................................................. 4
3.1.1 Historical Background of EFDs in Tanzania ..................................................... 4
3.1.2 Technical Preparation of EFDs.......................................................................... 5
3.1.3 Types of EFD Applicable in Tanzania .............................................................. 7
3.1.4 EFDs Phase I ..................................................................................................... 8
3.1.5 EFDs Phase II .................................................................................................. 10
3.2 Challenges of Implementing EFDs ......................................................................... 14
3.2.1 Cost of EFDs ................................................................................................... 14
3.2.2 Network Problems ........................................................................................... 15
3.2.3 Poor Quality of Paper Rolls ............................................................................. 16
3.2.4 The Location of Approved Suppliers .............................................................. 17
3.2.5 Poor Quality of EFDs and Weak Batteries ...................................................... 18
3.2.6 The lack of Provision of an After-Sales Service ............................................. 19
3.2.7 Compatibility Issues ........................................................................................ 20
3.2.8 Limited Technical Functions and Lack of Technicians ................................... 20
3.2.9 Reluctance of Traders to Use EFDs ................................................................ 21
3.2.10 Limited Coverage and Implementation of EFDs ............................................. 23
3.2.11 Weak Enforcement of the Laws and Regulations............................................ 24
3.3 Lessons Learnt from the Adoption and Implementation of EFDs ........................... 24
3.3.1 Importance of the Participatory Approach: ..................................................... 25
3.3.2 Change Management Requires Investment ..................................................... 25
3.3.3 Technology Acceptance Model [TAM] .......................................................... 25
iv
3.3.4 Importance of Education and Sensitization Campaigns .................................. 25
3.3.5 Importance of Appropriate Platforms .............................................................. 26
3.3.6 Tax is Burdesome to Taxpayers ...................................................................... 26
3.3.7 Importance of Investing in Human Resources ................................................ 26
3.3.8 Having a Clear Understanding of the Implementation Phases ........................ 26
3.3.9 Importance of the Media ................................................................................. 27
3.3.10 Unique Role of Customers .............................................................................. 27
3.4 Opportunities and Challenges for the Dialogue Process ......................................... 27
3.4.1 Opportunities for the Dialogue Process ........................................................... 27
3.4.2 Challenges of the Dialogue Process ................................................................ 28
4.0 Conclusion and Recommendations ................................................................... 29
4.1 Conclusion ............................................................................................................... 29
4.2 Recommendations ................................................................................................... 30
4.2.1 Recommendations for the Government ........................................................... 30
4.2.2 Recommendations for TRA ............................................................................. 31
4.2.3 Recommendations for the Approved EFDs Suppliers ..................................... 32
4.2.4 Recommendations for the Approved EFDs Manufacturers ............................. 33
4.2.5 Recommendations for the Network Providers-Vodacom and Airtel ............... 33
4.2.6 Recommendations for the Traders [EFD Users] ............................................. 34
4.2.7 Recommendations for the Customers .............................................................. 34
4.2.8 Recommendations for the Media ..................................................................... 35
Appendices ................................................................................................................... 36
Appendix 1: Tax Rates Under the Presumptive Tax System .............................................. 36
Appendix 2: Arrest of the Chairman of the Traders’ Association ....................................... 37
Appendix 3: Picture of EFDs [Sample] ............................................................................... 37
References .................................................................................................................... 39
v
List of Tables
Table 1: Reviewed Documents [Selected] ..................................................................... 3
Table 2: Profile of Respondents ..................................................................................... 4
Table 3: List of the Approved EFD Models Distributed in Tanzania ............................ 5
Table 4: List of the Approved Manufacturers of EFDs in Tanzania ............................. 6
Table 5: List of the Approved Suppliers of EFDs in Tanzania ...................................... 6
List of Figures
Figure 1: Domestic VAT Collection in Mainland Tanzania ........................................ 10
Figure 2: Some Traders Protesting against Usage of EFDs ......................................... 11
Figure 3: Traders Protesting against Usage of EFDs ................................................... 13
Figure 4: Technology Acceptance Model (Davis, 1989) ............................................. 25
Figure 5: Potential EFD Stakeholders to participate in the Dialogue Process ............. 28
vi
Acronyms
CPRA Centre for Policy Research & Advocacy
EFDs Electronic Fiscal Devices
IT Information Technology
SMEs Small and Medium Enterprises
TAM Technology Acceptance Model
TAPSOA Tanzania Petrol Stations Operators Association
TAS Tanzanian Shillings
TCCIA Tanzania Chamber of Commerce, Industry and Agriculture
TRA Tanzania Revenue Authority
TTA Tanzania Trade Association
VAT Value Added Tax
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 1
1.0 Introduction
1.1 Background Information
The primary concern of any tax administration is how to increase tax compliance
without causing economic distortion in the economy. Taxes are “the compulsory,
unrequited payments to the general government sectors” (Messere, & Owens, 1987,
p.37). Tax compliance includes four issues: registration of the taxpayer, filling in tax
returns to declare tax liability, paying taxes on time, and submission of complete
information to the tax authority (Kirchler et al. 2007; Casey & Castro, 2015). To
increase tax compliance, tax administrations have increasingly been using information
technology (IT) as a key enabler in controlling tax evasion (Casey & Castro, 2015).
Tax evasion is the tendency of people to reduce their tax liability illegally (Allingham
and Sandmo,1972). One of the ways taxpayers use to evade tax is to manipulate their
records or not provide sales receipts, resulting in the under-declaration of taxable
revenue. Consequently, the Tanzania Revenue Authority (TRA) adopted the
Electronic Fiscal Device (EFD) to “combat non-compliance, particularly concerning
sales and value added tax (VAT) payable on sales” (Casey & Castro, 2015, p. 7). An
EFD is a machine designed for use in business for efficient management control in
areas of sales analysis and stock control which conform to the requirements specified
in the Valued Added Tax (Electronic Fiscal Devices) regulations), 2010 and the
Income Tax (Electronic Fiscal Devices) Regulation, 2012). Using the machine, the
TRA can monitor business transactions in real time as they are recorded via the
internet. Thus, effective use of EFDs enhances two components of tax compliance:
submission of complete information on time, and declaration of accurate tax returns
when the tax is charged on sales as in the case of VAT.
Despite the above seemingly good promise of EFDs, most businesses in Mainland
Tanzania perceive their introduction to be burdensome. This is attributed to the
challenges faced by traders during adoption and implementation of EFDs in the
country. In particular, the deployment of EFDs faced a number of challenges,
including battery problems, the lack of a Swahili EFD version, inadequate training in
how to use them, network and printer failure, the issuing of inferior receipts, and slow
repairs of EFDs (TCCIA& PAMOMA, 2012; Weru at al., 2013; Ikasu, 2014).
Similarly, immediately after their introduction in 2011, most EFDs had network
problems, which limited submission of important reports to TRA, and many failed to
do so (TCCIA & PAMOMA, 2012). Also, as a result of inadequate knowledge and
the skills needed for using EFDs, many businesses made wrong entries, resulting in
the declaration of higher revenue than intended, in which case sometimes the
additional tax paid was not rectified by the TRA. Furthermore, many businesses
reported the absence of maintenance services at their business premises as most
suppliers are located in major cities and towns such as Dar es Salaam, Mwanza,
Arusha and Mbeya.
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 2
Therefore, some businesses have been reluctant to use EFDs, leading to a
confrontation between taxpayers (traders) and TRA. Despite numerous attempts by
TRA to resolve these misunderstandings through negotiation, confrontation has
continued, which has caused traders to strike in many parts of the country.
Unfortunately, strikes and shop closures cost the government an estimated loss of tax
of Tshs 3 billion a day (Malanga, 2015), and denied customers much-needed goods.
In an attempt to address the matter, in early 2015, the Government filed a case against
some business leaders for allegedly mobilising their counterparts to boycott the
implementation of EFDs. As of now, the business community still has concerns about
the usage of EFDs.
Despite this, rigorous research on the adoption and implementation of EFDs is
lacking. What research there is has tended to focus on the challenges of EFDs
(TCCIA & PAMOMA, 2012; Ikasu, 2010) and their impact on VAT compliance
(Sagas, Nelimalyani, and Kosgeikimaiyo, 2015; Casey and Castro, 2015). As a result,
evaluation of EFDs from adoption to implementation is lacking. Also, little is known
about how the responsible parties such as TRA and the business community engage
with each other to address the noted challenges of EFDs. Similarly, the manner in
which each party addresses the claimed challenges and their impact on the level of
compliance is not known. Therefore, this study traces the adoption and
implementation of EFDs in Tanzania and provides recommendations for improving
the level of compliance. This study focused on both VAT and non-VAT-registered
traders who are required to use EFDs and therefore extends the previous study done
by TCCIA& PAMOMA (2012) which focused on VAT-registered traders only.
1.2 Research Objectives
This study was aimed at obtaining an in-depth understanding of the pertinent issues
which characterized the introduction and adoption of EFDs by the business
community in Tanzania so as to identify the opportunities and challenges of the
dialogue process. It explored relevant issues from the different groups, namely, the
business community and their associations, tax officials and other stakeholders. In
particular, this research aimed to achieve the following objectives: (1) To analyse the
mechanisms and/or processes used to adopt EFDs and assess their impact and/or
influence on the level of compliance by the business community in Tanzania (2) To
analyse the challenges of using the EFDs and the methods used by the business
community to voice their concerns; and (3) To identify the opportunities and
challenges of the dialogue process.
2.0 Research Methodology
2.1 Methodological Approach
This research was undertaken using mainly qualitative inquiry. The approach is
deemed appropriate when studying events which have multiple realities (Burrell and
Morgan, 1977; Strauss and Corbin, 1998). In fact, stakeholders have different views
on the introduction and implementation of EFDs in Tanzania. This warrants the use of
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 3
qualitative inquiry which ensures that multiple realities are captured (Parker, 2008). In
general, a study of this kind should include all stakeholders involved in the entire
process of adopting and implementing EFDs in Tanzania. These include TRA
officials, business associations, responsible ministries, individual traders, and EFD
manufacturers and suppliers. However, given the duration of this study some potential
respondents/stakeholders were not involved. For instance, all EFD manufacturers are
located outside the country and therefore were not included in the study. Similarly,
the bureaucratic nature of government offices made it difficult to interview some
important officials from the two ministries of Planning and Finance and Trade and
Industry. However, the views of those stakeholders were sought from those
interviewed. For instance, the concerns of EFD manufacturers were partly captured
through the interviews conducted with TRA officials, EFD suppliers and individual
traders.
2.2 Data Collection and Analysis
Three main data collection approaches were employed in this study, namely, review
of the relevant documentary sources, in-depth interviews with the relevant
stakeholders and observation. The review concentrated on those documents deemed
relevant for understanding the adoption and implementation of EFDs in Tanzania.
They excluded those which were consulted as part of the literature review. In
particular, the review included tax laws (statutes), policies and other relevant reports.
A list of the reviewed documents is shown in Table 1.
Table 1: Reviewed Documents [Selected]
S/N Name of the Document Source
1. The Value Added Tax Act, Cap 148 TRA
2. The Value Added Tax (Electronic Fiscal Devices)
Regulations, 2010 TRA
3. The Income Tax Act, Cap 332
4. The Income Tax (Electronic Fiscal Devices) Regulations,
2012
5. Taxes and Duties at Glance 2014/2015 TRA
6. A Guide to the Electronic Fiscal Devices (EFDs) for Non-
VAT Traders TRA
7. Regulatory Constraints on the Competitiveness of the
Tourism Sector in Tanzania: Platform for Advocacy by Zaki
Raheem and Alex Mkindi
The Tourism
Confederation of
Tanzania (TCT)
8. Challenges facing VAT-Registered Businesses in Operating
EFDs in Tanzania: A Pilot Study of Morogoro, Iringa and
Njombe Regions and a Small Part of Dar es Salaam Region
TCCIA,
Morogoro
The texts were read and relevant issues relating to the adoption and implementation of
EFDs in Tanzania were noted. To complement the issues raised in the reviewed
documents, the mode of operations in the visited approved suppliers was observed.
Then, 32 interviews with key informants from TRA, EFD suppliers, trade
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 4
associations, individual traders and members of business dialogue/advocacy platforms
were conducted. To get a complete picture of EFD implementation, customers were
also interviewed. Within each of these groups, we chose those (representatives) who
were directly involved in the adoption and implementation of EFDs in the country.
For instance, in the case of traders, the study interviewed those who are using EFDs
and those who might use them in future. To obtain a detailed understanding of the
complexities involved in each of the two phases of implementing EFDs, traders using
them in both phases were also involved. In particular, hotels, supermarkets, bureaux
de change, retail outlets, petrol stations and merchandising entities were included in
the interviews. TRA officials concerned with the management and operationalization
of EFDs were involved. In the case of trade associations, interviews were conducted
with members who were directly involved in negotiating with tax officials concerning
the application of EFDs. The following table shows the profile of the respondents.
Table 2: Profile of Respondents
Interviewees Number
TRA Officials 4
Approved EFD Suppliers 3
Customers 5
Members of Trade Associations 3
Traders [Supermarkets, petrol stations, Bureaux de Change, Retail, etc.] 15
Members of Advocacy/Dialogue Initiatives 2
Total 32
On average, the interviews took 70 minutes and focused on issues relating to the
adoption and implementation of EFDs in Tanzania. In particular, the interviewees
were asked to provide clarification on the background and rationale for the
introduction of EFDs, their implementation challenges and the mechanisms used to
engage the business community. For instance, during the interviews, questions such as
‘why did TRA decide to introduce EFDs’, ‘what would be regarded as challenges
hindering the implementation of EFDs’ and ‘was the business community effectively
engaged in the introduction and implementation of EFDs’ were asked. All interviews
were hand-written and analysed using the qualitative approach recommended by
Strauss &Corbin (1998).
3.0 Findings
3.1 Adoption and Implementation of EFDs in Tanzania
3.1.1 Historical Background of EFDs in Tanzania
The idea behind EFDs started many years ago when the Government of the United
Republic of Tanzania intended to enhance businesses’ record keeping for various
purposes including taxation. In 2000, the Government through the Ministry of
Finance and TRA introduced the Electronic Cash Register. This decision was made
after the Government learnt that the same system was introduced in Zambia, which
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 5
increased its revenue by 20 percent. Electronic Cash Registers, which were introduced
to VAT-registered traders only, were very successful initially. They were used mainly
by supermarkets and other large businesses for both internal and external purposes.
Internally, they were used as part of record keeping and an internal accountability
check. The same register was used externally for audit and tax purposes. However,
after some time, the usage rate became very low. Most traders abandoned the system
completely and lack of enforcement was regarded as the major reason for the failure.
As one TRA official noted, ‘we did not put in place effective enforcement mechanisms
to ensure that traders comply with the introduced Electronic Cash Register’.
After the failure of the Electronic Cash Register and following major restructuring of
the then Tax Department to become the current TRA, the Government embarked on a
project which would enhance domestic tax revenue collection. In the course of
implementing this, the Government and TRA learned that other countries were using
EFDs. As part of their learning, some TRA staff were sent to Kenya, Italy and
Ethiopia, which were using EFDs and were deemed appropriate for providing lessons
for Tanzania. Together with learning, the Government, and TRA in particular, started
undertaking various internal arrangements for successful implementation of EFDs,
including education and sensitization programmes for the traders.
3.1.2 Technical Preparation of EFDs
Since EFDs are fixed machines which cannot be used for any other purpose, and as
part of technical preparation, the Government decided to design the machine’s
specifications. The models included in the following Table have passed the Technical
Specifications Compliance Test and approved to be distributed in Tanzania:
Table 3: List of the Approved EFD Models Distributed in Tanzania
S/N Model Name of the Manufacturer Country of Origin
1. expert SX Daisy Technology Bulgaria
2. DP 25 Datecs Limited Bulgaria
3. TREMOLS Tremol Limited Bulgaria
4. JSMART Custom Engineering SPA Italy
5. PRIMA HCP d.o.o Serbia
6. DP 05 Datecs Limited Bulgaria
7. FUEL POS 500 Datecs Limited Bulgaria
8. DP 35 Datecs Limited Bulgaria
9. TREMOLM Tremol Limited Bulgaria
Source: TRA (2013)
Based on the approved EFD models to be distributed in Tanzania, a tender was
floated to the potential manufacturers of the machines to apply. In the first phase, four
(4) approved manufacturers were selected to produce the EFDs based on the
developed specifications. It is worth noting that all manufacturers were obtained from
outside Tanzania. A Memorandum of Understanding (MoU) between TRA and the
manufacturers was drawn up spelling out the rights and obligations of both parties.
Later, and especially after the introduction of EFDs Phase II, it was decided to
increase the number of manufacturers in order to cope with the increased demand for
EFDs. In this regard, four (4) additional manufacturers were added. Therefore, in
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 6
total, there are eight (8) TRA-approved manufacturers of EFDs. The rights and
obligations of the approved manufacturers of EFDs are spelt out in Regulation 8 of
the Value Added Tax (Electronic Fiscal Devices) Regulations, 2010 and in Regulation
7 of the Income Tax (Electronic Fiscal Devices) Regulations, 2012. A list of the
approved manufacturers of EFDs in Tanzania is shown in the Table below:
Table 4: List of the Approved Manufacturers of EFDs in Tanzania
S/N Name of the Manufacturer Country of Origin
1. Custom Engineering SPA Italy
2. RCH SPA Italy
3. Dates Limited Bulgaria
4. Incotex Bulgaria
5. Archlik A.S. Turkey
6. Daisy Technologies Bulgaria
7. HCP d.o.o Serbia
8. Tremol Limited Bulgaria
Source: TRA (2013)
The same process was used to select suppliers of EFDs and six (6) were selected as
approved suppliers in the first phase of implementation. Later, and especially after the
introduction of EFDs Phase II, it was decided to increase the number of suppliers to
cope with the increased demand for EFDs and their related services. In this regard,
five (5) additional suppliers were included. Therefore, in total, there are eleven (11)
approved suppliers of EFDs in the country. As regards manufacturers, the rights and
obligations of EFD suppliers are described in Regulation 7 of the Value Added Tax
(Electronic Fiscal Devices) Regulations, 2010 and Regulation 7 of the Income Tax
(Electronic Fiscal Devices) Regulations, 2012. A list of the approved suppliers of
EFDs in Tanzania is shown in the Table below:
Table 5: List of the Approved Suppliers of EFDs in Tanzania
S/N Name of the Supplier Head Office in the Country
1. Advatech Office Supplies Limited Dar es Salaam, Tanzania
2. Bolsto Solutions Limited Dar es Salaam, Tanzania
3. Business Machines Tanzania Limited [BMTL] Dar es Salaam, Tanzania
4. Checknocrats Tanzania Limited Dar es Salaam, Tanzania
5. Compulynx Tanzania Limited Dar es Salaam, Tanzania
6. Maxcom Africa Limited Dar es Salaam, Tanzania
7. Pergamon Group Limited Dar es Salaam, Tanzania
8. Power Computers Telecommunication Limited Dar es Salaam, Tanzania
9. SoftNet Technologies Limited Dar es Salaam, Tanzania
10. Total Fiscal Solutions Limited Dar es Salaam, Tanzania
11. Web Technologies Tanzania Limited Dar es Salaam, Tanzania
Source: TRA (2013)
It is important to note that in the previous study conducted by TCCIA and PAMOMA
(2012), three suppliers not in the list were found to be supplying EFDs to traders.
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 7
These were Altech, Nameet/Namit and Planet 2000. As the study recommended, it is
important for TRA to establish the legality of these three suppliers and take
appropriate action.
At the operational level, suppliers are required to purchase the approved EFDs from
approved manufacturers and to sell and distribute them to traders in Mainland
Tanzania. In this regard, TRA is responsible for connecting the two. Regulation 7 (1)
(c) of the Value Added Tax (Electronic Fiscal Devices) Regulations, 2010 and
Regulation 7 (1) (c) of the Income Tax (Electronic Fiscal Devices) Regulations, 2012
require approved EFD suppliers to submit to the Commissioner General relevant
evidence of EFD sales to users. The required details have to include information on
sales, invoices, job card, users’ particulars, including Taxpayers Identification
Number and, where relevant, the VAT Registration Number. In addition, an approved
EFD supplier must prepare a monthly inventory of the machines, indicating the
number of machines in existence at the beginning of the month, number of machines
purchased from approved manufacturers, number of machines sold to traders,
particulars of the traders, and the machines remaining in the store. To track EFDs,
their details are submitted to the Commissioner General on a monthly basis. As part
of the MoU, the approved suppliers are also required to provide an after-sales service,
such as (1) issuing an instruction manual (2) distributing EFDs to the users (3)
installing, configuring and activating the supplied EFD at users’ premises (4) keeping
a stock of spare parts and accessories for users for a period of not less than five years
from the time when the last batch was supplied (5) training users in the efficient use
of EFDs (6) supporting and maintaining the supplied EFDs at users’ premises to
ensure their smooth running. The following sections discuss the extent to which this
after-sales services is provided.
3.1.3 Types of Electronic Fiscal Devices (EFDs) Applicable in Tanzania
There are various types of EFDs in use [See Appendix 3], depending on the type of
business. However, in the context of Tanzania, the following EFDs were initially
introduced:
I: Electronic Tax Register
This device is appropriate and commonly used by retail businesses that issue receipts
manually, also known as the Electronic Fiscal Cash Register. It may be used as a
stand-alone device as it keeps totals in a fiscal memory and prints receipts on an in-
built printer.
II: Electronic Fiscal Printer
This device is commonly used by computerised retail outlets. It is connected to a
computer network that stores every sale in its fiscal memory as the user issues receipts
to customers. It is similar to printers that are currently used in supermarkets, except
for the fiscal memory. Users of this kind of device include supermarkets, petrol
stations and ticketing.
III: Electronic Signature Device
This device is used by computerised businesses that issue receipts or invoices via
special accounting software such as Tally. The device is designed to authenticate the
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 8
signature of any personal computer producing a financial document such as a tax
invoice. The device uses a special computer program to generate a unique number
(signature) which is appended and printed on each invoice issued by the user’s
system. It is also an authority key for the user’s computer functionality without which
it cannot save or print a document.
Owing to some industry-specific demands, two more EFDs that are industry specific
were introduced. These are:
IV: Fuel Pump Electronic Fiscal Printer
These machines are used by petrol stations. They are connected directly to the petrol
pump and the receipt is automatically printed as soon as the attendant finishes serving
a customer.
V. Electronic Fiscal Printer for Bureaux De Change
These are specific machines for bureaux de change, with the capacity to send real
time reports to the Bank of Tanzania and send the required reports to TRA.
NB: The introduction of the last two types was partly attributed to the overall
objective of the Government of ensuring that EFDs are predominantly used by most
traders. It is also important to note that the above two types of EFD address some of
the compatibility problems faced by traders. However, as can be seen in the details
presented in Section 3.2 of this report, these machines are also facing some
challenges.
3.1.4 EFD Phase I
After the necessary technical preparation of EFDs as presented in Section 3.1.2, the
Government decided to start implementation of EFDs with effect from 1st July, 2010.
This was regarded as EFDs Phase I and to ensure its effective implementation, the
Government decided to prepare a new regulation specifically governing this phase.
Also, in this phase, as part of learning, the Government decided to start with VAT-
registered traders only, who typically were those with an annual turnover of over TAS
40 million. Therefore, EFDs were made mandatory for all traders who were registered
or who qualified to be registered for VAT. In this context, the overall administration
of EFDs Phase I is governed by the Value Added Tax Act, Cap 148 and the Value
Added Tax (Electronic Fiscal Devices) Regulations, 2010. All the earmarked traders
were educated and sensitized on how to use EFDs. The sensitization and education
programmes were designed and provided via the radio, television and newspapers.
Also, a guide on how to use EFDs was distributed to the earmarked traders. Various
training courses, seminars and workshops targeting specific types of traders and
specific locations were also conducted. In particular, the education and sensitization
programmes focused on major aspects of EFDs, such as their importance for business
record keeping in general, how to issue an EFD receipt, and how to submit a daily
report [technically known as a Z report] to the TRA.
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 9
Anecdotal evidence suggests that EFD Phase I was generally successful in various
ways. Firstly, there were no major complaints from the business community on the
usage of the machines. As illustrated in the following quote, even TRA officials had
the same feeling:
“…It [Phase I] was a very successful phase. We had no major problems. Except for a
few technical challenges, we had no major complaints from users of EFDs … [TRA
Official] [Emphasis added]
This might be attributed to the fact that few traders were required to use EFDs in this
phase and they were relatively large traders. In fact, only VAT-registered traders
(with an annual turnover exceeding TAS 40 million) were required to use EFDs in
Phase I. Because the cost of EFDs was fully met through a VAT refund, there were no
major complaints regarding their cost. It could be argued that large traders (VAT
registered) already had the experience of dealing with tax machines and most of them
had electronic tax registers in place. Secondly, the use of EFDs in this phase
contributed to increased VAT collections. In fact, as Figure 1 below shows, there was
a nominal increase in domestic VAT in Mainland Tanzania from TAS 825,853.3
million in the Financial Year 2010/2011 to TAS 1,316,820.7 million in 2013/2014.
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 10
Figure 1: Domestic VAT Collections in Mainland Tanzania
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200,000.0
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Domestic VAT in Millions Tshs
Despite the fact that this increase in VAT collection by 59.4% could be contributed to
by other factors, the influence of EFDs cannot be overlooked. It could be argued that
the machines facilitated both the ascertainment of taxes and identification of
taxpayers, which contributed to the noted increase in VAT collection. Therefore, as
Casey & Castro (2015) argued, when EFDs are used in conjunction with other
enforcement mechanisms, it is likely to increase tax revenue. Despite some noted
challenges (See Section 3.2), Phase I was regarded as very successful. This was also
evidenced in the previous study by TCCIA and PAMOMA (2012), which observed
that from TRA’s perspective, Phase I was very successful. However, the study
reported that traders/businesses were unhappy with the whole process of EFD
implementation (TCCIA and PAMOMA, 2012). The major reasons cited by traders
were the lack of appropriate knowledge/skills, the poor quality of some EFDs,
unreliable power supply and weak batteries, network and printer failure, poor quality
of paper rolls, and difficulty in accessing maintenance services (TCCIA and
PAMOMA, 2012). Notwithstanding these challenges, the Government in
collaboration with TRA decided to embark on the implementation of EFDs Phase II.
3.1.5 EFDs Phase II
As opposed to EFDs being used by VAT-registered traders only, in this phase, the
Government decided to extend the use of EFDs to non-VAT-registered traders with
effect from 1st July, 2013. However, to accommodate the demands of registered
traders and the need for more education and awareness-raising programmes, actual
implementation of this phase started on 1st January, 2014. In this phase, the
administration of EFD was governed by the Income Tax Act, Cap 332 and Income
Tax (Electronic Fiscal Devices) Regulations, 2012. For the sake of simplicity and
cost-benefit analysis, it was decided to include only those traders with an annual
turnover of over TAS 14 million and so about 200,000 registered traders were
earmarked in this phase. All the earmarked traders were educated and sensitized in
how to use EFDs. The sensitization and education programmes were designed and
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 11
provided via the radio, television and newspapers. Also, a guide on how to use EFDs
was distributed to the earmarked traders. Various training courses, seminars and
workshops targeting specific types of traders and specific locations were also
conducted. In particular, the education and sensitization programmes focused on
major aspects of EFDs, such as their importance for business record keeping in
general, how to issue an EFD receipt, and how to submit a daily report [technically
known as a Z report] to TRA. Most registered traders in this phase are regarded as
small and medium enterprises (SMEs) and given the low level of financial literacy,
some had problems understanding how to use EFDs appropriately:
“Most of these traders lack knowledge on how to use the machines [EFDs]. We train
them many times but some don’t know even how to issue a receipt [Fiscal Receipt]. It
is very challenging… [Approved EFDs Supplier] [Emphasis Added].
Unlike in Phase I, most of the registered traders earmarked to be supplied with EFDs
in this phase lacked financial capacity. Therefore, the introduction of an EFD was
regarded by them as an additional burden. As a result, within the first three months of
introducing EFDs in this phase (January-March, 2014), the country witnessed a major
protest by the registered traders. This involved, among others, go-slows, shut-downs
and strikes, which took place in major parts of the country including Dar es Salaam,
Mwanza, Morogoro, Mbeya and Kagera regions. As the following picture shows, the
protesting registered traders gave a very clear message to the Government, and TRA
in particular, “we don’t need machines (EFDs)”.
Figure 2: Some Traders Protesting against the Usage of EFDs
Source: https://www.google.co.tz/search?q=EFDs+strikes+in+Tanzania+in+Picture
During and after the protest, mixed statements were made by the Government
(represented mainly by TRA) and the traders. On the one hand, the Government
insisted that the machines were not a problem:
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 12
“…Traders across the country have been misled by false and inaccurate information
on the use of EFDs and that is why they remain reluctant to use them despite the
government’s repeated orders to do so…To reverse and correct the misconception
[…] TRA is to conduct an awareness-raising campaign across the country…Traders
have been misled by self-interested individuals who are disrupting the economic
development of the nation for personal gain… As an authority we are aware that the
traders have been misled and so we are conducting this campaign to educate them on
the use and value of EFDs……” [Richard Kayombo, Director for Taxpayer Services
and Education, TRA, quoted in the Guardian Newspaper, 2nd April, 2014] [Emphasis
Added].
The quoted Director specifically stated that:
“…[T]he reasons the traders give as to why they are unwilling to use EFDs are all
evidence of their misconception…”[Richard Kayombo, Director for Taxpayer
Services and Education, TRA, quoted in the Guardian Newspaper, 2nd April, 2014]
In contrast, the registered traders maintained that the machines had some technical
and operational problems which made their implementation difficult. This is
illustrated in the following quote:
“…Unlike TRA’s misconception, the traders are not against paying taxes but they
want an improvement in the tax collection system… The EFDs are not user
friendly…they only record sales but not purchases…so what good is that for the
trader?…” [Johnson Minja, Chairman of the Business Community of Kariakoo, Dar
es Salaam, quoted in the Guardian Newspaper, 2nd April, 2014].
Despite the various initiatives to address the matter, an antagonistic relationship
between TRA and registered traders continued. As a testimony to the problem and the
importance of using EFDs, the then President of the United Republic of Tanzania,
Hon. Jakaya Mrisho Kikwete, was once quoted saying:
“…I know there are a lot of issues raised concerning the machines [EFDs]. But my
advice is that you discuss the problems and find solutions. If the problem is price, it
should be resolved. We need this system for efficient collection of tax...” [Emphasis
Added]
As a response to the President’s directives, TRA started a massive sensitization
campaign to educate traders on the importance of EFDs and clear up what were
regarded by Government officials as outspoken misconceptions. As indicated in the
box below, the door for discussion was opened for the traders to raise their concerns
relating to the implementation of EFDs.
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 13
Box 1: Opening a Room for Negotiation between TRA and Traders
Despite these efforts, registered traders were not convinced about using EFDs. It is
also important to note that during the same period an amendment was made to the
Income Tax Act to double the rates applicable to presumptive taxes, which most
individuals running small businesses pay. This led to small business owners’ wrong
perception that the EFDs were responsible for the increase in presumptive taxes. As a
result, silent as well as open protests, as shown in the following picture, were
witnessed in all the country’s major business centres.
Figure 3: Traders Protesting against the Usage of EFD Machines
Following the failure to address the matter through negotiations, late in January 2015,
the Government decided to file a legal case against some business leaders allegedly
mobilising others to boycott the implementation of EFDs. This resulted in more unrest
and protests by many traders across the country (see Appendix 1). As of now, the case
is yet to be decided and there are still concerns amongst the business community
about the usage of EFDs. This research report presents some of these concerns in the
following sub-sections.
Let’s Discuss, Government Tells Traders TRADERS in the country have been advised to take complaints relating to the use of
electronic fiscal devices (EFDs) to the government instead of staging protests in the
streets.
Speaking to the 'Daily News', the Tanzania Revenue Authority (TRA) Deputy
Commissioner General, Mr Rished Bade, said the government was always willing to
work with the traders selected to use the EFDs to address the challenges they were
facing.
By Rose Athumani, Daily News, 12th February, 2014
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 14
3.2 Challenges of the Implementation of EFDs
3.2.1 Cost of the EFDs
There have been concerns amongst the business community that the machines are
very expensive. In this regard, it is important to note that these concerns were raised
during Phase II. This is partly attributed to the fact that those involved in Phase I were
VAT-registered traders who can claim the whole cost of EFDs from VAT.
Nevertheless, depending on the type and envisaged functions of the machine, the price
ranges from TAS 2,000,000 to TAS 6,000,000. It was noted during fieldwork that the
machine with the lowest price was the Electronic Tax Register, which is used mainly
by retail business that issue receipts manually and the highest price was for the
Electronic Fiscal Printer, especially those used at petrol stations, as one trader
claimed:
“These machines [EFDs] are very expensive. It is difficult to buy them. In a business
like this [small business], it is very challenging to maintain the machine…” [Trader]
[Emphasis Added].
Similar claims were made by another trader who was also Chairman of the Tanzania
Taxpayers Association:
“This move will drive many small-scale businesses out of business because the
burden of paying for the EFD is unbearable… Many small-scale businesses have an
annual turnover of 14m/-, which if we take into consideration a 30 percent profit
recognized by the Income Tax Act, we get 9.8m/-, which translates into 816,000/- as
start-up capital and this is what the EFD costs… [T]he minimum threshold should be
pegged at [TAS] 20m/- turnover per annum…[Otieno Igogo, Chairman of the
Tanzania Taxpayers Association, quoted in All Africa, 6th January, 2014][Emphasis
Added].
It is worth noting that even large businesses had similar concerns. This is reflected in
the following quote:
“As for us, each pump needs to be fitted with its own EFD which costs 2,500 to 3,000
US dollars. In petrol stations you have four to six pumps with machines, and so this
issue needs to be looked at critically…EFD manufacturers need to come up with
gadgets which can be connected to two fuel pumps…” [Farough Barghoza, Chairman
of the Tanzania Petrol Stations Operators Association (TAPSOA), quoted in the
Daily News, 15th February, 2016].
On the other hand, the Government and TRA officials in particular insisted that the
claims are baseless as the full cost of EFDs is recovered through tax deductions: “The
claim that EFDs are expensive does not hold water. We all know that the trader can recover
the entire cost of the machines through tax deductions…” [TRA Official].
However, looking at the respective tax laws (the VAT Act and the Income Tax Act)
the only traders who can recover the whole cost of the EFDs are those who are VAT
registered, who can claim the whole cost of EFDs as a tax credit/tax deduction under
the VAT Act. As regards the non-VAT-registered traders, those submitting income
tax returns (turnover from TZS 20 million and above) are eligible to claim the full
cost of the machine as a class 8 depreciable asset (this being a deduction by
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 15
calculating taxable income, thus receiving a saving of only up to a 30% of the tax
payable). Despite the fact that non-VAT traders can claim the cost as a deduction
under Class 8 [Depreciable Assets] under the Income Tax Act, in practice it is
difficult to claim the entire cost in the year of purchase. In the meantime, the
Government is planning to issue EFDs freely to earmarked traders. During a
conversation with the Chairman of the Business Community of Kariakoo, the
President of the United Republic of Tanzania, Hon. John Pombe Magufuli, reiterated
the need to supply EFDs freely to the earmarked traders. On this, he said:
“…If it had been up to me, I would have given you the devices [EFDs] free of charge
and see how much I collect in revenue, simple…”[President John Pombe Magufuli,
quoted in the Guardian, 8th December, 2015[Emphasis Added].
However, some interviewed approved EFD suppliers were concerned about the
proposed decision of the Government on the grounds that traders who are given the
gadgets freely may not be committed to using them. In this regard, one approved EFD
supplier argued, ‘if they don’t use and take care for the ones they purchased, I don’t
think they will appropriately and consistently use and take care of those which will be
provided freely’. It is also important to note that the Government is planning to buy
EFDs directly from the approved manufacturers and let the approved suppliers
distribute them to the earmarked traders. This move is highly contested by the
approved suppliers. Whilst it is encouraging that the Government is now involved
in addressing the challenges relating to the cost of acquiring EFDs, care is
needed to ensure that the intervention is appropriate and good results are
produced for all the parties involved.
3.2.2 Network Problems
Our research respondents generally cited network connectivity as a major problem of
the EFDs. Interestingly, even the interviewed TRA officials and approved suppliers
raised the same concern. Registered traders are required to send a daily report,
technically known as a Z report, to the TRA. The gadget is empowered with a chip
[SIM card] which communicates with the TRA server. The service providers of the
network are Vodacom and Airtel and all the chips are maintained and secured by
TRA. It is worth noting that network problems was also prevalent in Phase I of EFD
implementation (TCCIA and PAMOMA, 2012). This is further illustrated by the
trader who installed the machine during EFD Phase I:
“…The machine is good but the network is the major problem. It is very difficult to
issue a receipt and send a Z report to TRA. It takes too long to send the report and
sometimes it is not sent at all. It is very frustrating…” [Trader]
Initially, the machine was configured to send a Z report daily and if a trader failed to
submit it within 24 hours, the machine was automatically locked. The interviewed
TRA officials were of the view that this was necessary to ensure that all the daily
sales of EFD traders are stored in the TRA server to facilitate the administration of
taxes. However, following repeated claims by the business community of problems
with the network, TRA decided to lengthen the time for submitting the Z report from
24 hours (1day) to 72 hours (3 days). Rationalising this decision, one TRA official
stated:
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 16
“…We assume that within 3 days the network breakdown should be over and the
trader should be able to submit the Z report…” [TRA Official]
However, our findings suggest differently. Some of our interviewed traders
experienced network problems beyond the allowed 3 days, and in some cases, the
problem lasted for about 7 days. This is partly attributed to the increased number of
users of EFDs. Unfortunately, most traders tend to communicate with the approved
suppliers of EFDs concerning a network problem, but they can do nothing:
“[…] Traders normally call us to resolve their network problem. They think we will
be able to help them. In fact, we cannot. We normally advise them to wait for the
network to be restored….” [Approved EFD Supplier].
As a testimony to the magnitude of the network problem, we interviewed a trader who
spent about 9 hours moving around with his EFD to get help with submitting his Z
report to TRA. Therefore, it is high time for the Government and TRA in
particular to address the network problem. This could be partly addressed by
allowing other service providers, which may enhance competition. Similarly, it is
important to have a platform where service providers can communicate with
other EFD stakeholders, including traders. While there was a lot of interaction
between traders and approved EFD suppliers, our study did not find the
evidence of this between traders and network service providers. Another
intervention would be to enhance the TRA server so that it can handle the heavy
traffic of EFD Z reports that come in daily, as the queue in the server could be
the main reason for the delay and the failure of some traders to submit their
reports. This is attributed to the fact that the network service providers have
quite a high level of reliability and there are no serious network problems in
other services.
3.2.3 Poor Quality of Paper Rolls
The quality of paper rolls used in the EFDs has also been a subject of discussion
because the EFD receipts issued do not last long before fading due to the poor quality
of the paper rolls. The previous study by TCCIA and PAMOMA (2012) also observed
this. In particular, the study found that the fiscal receipts issued were of poor quality
and did not last long, which was confirmed by traders and customers who complained
of the poor quality as one trader claimed:
“The receipts [fiscal receipts] fade within a very short period of time after being
issued. They are totally unreadable, while TRA wants the receipt to be stored for a
period of 5 years…I have a copy of Z reports of the last few months and they are
completely unreadable …” [Trader][Emphasis Added].
Our interview with one of the approved EFDs suppliers suggests that even the
technical problems experienced by some machines were attributed to the poor quality
of the paper rolls. This is illustrated in the following quote:
“…We have a certain customer who is always complaining about his EFD. I sent all
my technicians, but the problem was still there. I decided to go myself. Then I asked
him to give me his machine. After opening it, I realized that the paper rolls used were
of poor quality and affected the path of the machine which slides the papers. Then, I
asked one of my technicians to go and buy a quality paper roll and I put it in the
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 17
trader’s machine. Since then, the machine has been operating smoothly…”
[Approved EFDs Supplier].
In an attempt to address this anomaly, TRA has emphasized that the paper used for
printing EFDs receipts must be thermal paper, which is expected to last for about five
(5) years without losing its character. To ensure the usage of quality paper and
minimise public outcry, in Phase II, TRA selected suppliers of fiscal paper rolls who
would supply them to other suppliers. These approved suppliers are (1) Checknocrats
Tanzania Limited, (2) Advantech Office Supplies (3) Total Fiscal Solutions Tanzania
Limited, and (4) Business Machines Tanzania Limited. Despite these efforts, poor
quality paper rolls are still available in the market and a solution is being sought to
remove them. One approved supplier claimed that most traders prefer poor quality
paper rolls because they are cheaper. This claim is substantiated by the fact that the
average price of quality paper rolls from approved suppliers is TAS 3500, while those
available from unapproved suppliers stood at TAS 2000. Therefore, to ensure
sustainability of fiscal receipts for record keeping and appropriate usage of the
EFDs, it is recommended that TRA take immediate measures to ensure that only
paper rolls from approved suppliers are used by traders.
3.2.4 Location of the Approved Suppliers
It was noted during this study that approved EFD suppliers did not exist in many parts
of the country. As part of the agreement between the approved EFD suppliers and the
Government, the former has to establish and operate service centres in every region in
the United Republic of Tanzania. In fact, the approved suppliers must have offices in
all business centres to effectively serve EFD users, and they are required to offer
support and maintain the supplied EFDs at the users’ premises. However, this was not
observed. Instead, all the suppliers are concentrated in major cities and towns such as
Dar es Salaam, Mwanza, Arusha, and Mbeya. Rationalising this, one approved EFD
supplier claimed that:
“This country is huge. It is very difficult to serve the entire country. We are trying to
have offices in major business cities and towns but it is very difficult to serve the
entire country. It is not practicable….” [Approved EFD Supplier]
Similar comments were made by another approved EFD supplier:
“…Yah, we are supposed to operate in the entire country. Yes, we are trying, but it is
difficult. You know the geographical locations of this country, it is difficult. Even
TRA has no offices in all business centres…” [Approved EFDs Supplier][Emphasis
Added].
As a result, we found traders travelling from different parts of the country to the
offices of the approved suppliers for support and maintenance. In some cases, traders
are forced to send EFDs to the suppliers for this. In this context, it is difficult to
suggest that the approved suppliers deal with malfunctions within forty eight (48)
hours from the reporting time as required by EFD regulations. Surprisingly, the same
problem was noted four (4) years ago by the study conducted on VAT-registered
traders by TCCIA and PAMOMA (2012). This indicates that the situation is yet to be
rectified. Therefore, whilst it seems impracticable for the approved suppliers to
establish an office in each business centre, appropriate arrangements could be
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 18
made to ensure availability of the service close to EFD users. In particular, TRA
could work with local government authorities located in parts not easily covered
by the approved EFD suppliers and find appropriate mechanisms for serving
EFD users located in their jurisdiction.
3.2.5 Poor Quality of EFDs and Weak Batteries
“Poor functioning of the EFDs, including the system being very slow, was reported to cause a
lot of inconvenience, especially when they attended to many customers. Unnecessary delays
were experienced which again caused unnecessary stress and put pressure on both the
customers and sellers. The VAT-registered traders from the survey areas reported to have
experienced damaged/failed devices many times” (TCCIA & PAMOMA, 2012, p.27).
Our study also noted the problems mentioned above. In particular, traders claimed
that the quality of EFDs and their batteries was poor and they need to be phased out:
“I am pretty sure that these machines are of poor quality. These are not genuine
machines. They cannot operate smoothly without frequent repairs and maintenance.
To be honest, these are fake machines…” [Trader].
However, the above claims were refuted by both TRA and the approved EFD
suppliers. Interestingly, the interviewed TRA officials and the approved suppliers had
the same observation that traders are avoiding using the machines and their poor
quality has been cited as an excuse. This is reflected in the following quote:
“…My friend, these machines are genuine. They passed all the international tests.
And you cannot say that these machines are of poor quality. You know these traders
are very intelligent. If you go to their business premises, everything is working except
EFDs. You may find the car is working, the computer is working…everything is
working except EFDs ….” [Approved EFDs Supplier].
Despite the above claims, traders were still of the view that some supplied EFDs are
of poor quality. Notwithstanding the fact that this could be used by dishonest
traders as an excuse for not using EFDs, it is important that TRA and the
approved EFD suppliers enhance the quality control mechanisms of the supplied
machines. This is further substantiated by the fact that fake EFDs are being supplied
by dishonest and unapproved suppliers in the country2.
Some traders also claimed that the batteries used in the machines are substandard.
This, coupled with the unreliability of the power supply which recharges them, led to
the implementation challenge. In response, the interviewed suppliers were of the view
that most traders do not know how to properly use the machines:
“You know, these machines are like computers. You can charge them while you have
power and then you may continue to use them even if there is no power. Instead, most
of our traders tend to use the machines without being connected to the power supply.
Therefore, after some time, the battery goes flat. Others, especially those who use the
2 “On August13, during a government crackdown by the police, they nabbed several businessmen with
fake EFD, reportedly stolen from Mwanza. Fasad Nasoro, the owner and director of CI Group was
arrested during an operation led by Deputy Minister of Finance, Mwigulu Mchemba with officials from
TRA. When arrested he was in possession of a machine with serial numbers 031TZ 54000053…”
[Reported by Nelso Kessy, Guardian on Sunday, 17th August, 2014].
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 19
machines occasionally, such as construction companies, we normally advise them to
put the machine on and charge it frequently. In my view, if you follow the
instructions on how to use these machines, you will not experience any problems…”
[Approved EFDs Supplier]
In fact, in the previous study by TCCIA & PAMOMA (2012) batteries were observed
to be the major problem followed by network failure. Therefore, there is a need for
the Tanzania Bureau of Standards to examine and certify the quality of the
manufactured EFDs and their batteries before being supplied to the registered
traders.
3.2.6 Inappropriate Provision of After-Sales Service
The MoU between TRA and approved EFD suppliers requires the latter to enter into a
written after-sales service agreement with the user to ensure that EFDs are
maintained. This is also in accordance with Reg. 7(1) (m) of the Value Added Tax
(Electronic Fiscal Devices) Regulations, 2010 and Reg. 7(1) (m) of the Income Tax
(Electronic Fiscal Devices) Regulations, 2012. The envisaged after-sales service
includes repairs and maintenance, training, education and other support. As discussed
in the previous section, these services are required to be provided at the users’
premises. However, it was observed during fieldwork that most traders have to go to
the approved suppliers for maintenance and other support services. This was also
noted in the previous study by TCCIA &PAMOMA (2012), indicating that this
anomaly has not been addressed.
Also, it is important to note that each approved supplier has its own arrangements for
dealing with after-sales service once the time of one year has elapsed. Other suppliers
offer a free service for the first three months and additional costs are applicable after
that. The traders then sign a service agreement whereby they need to pay the agreed
fee to the approved EFD supplier. Given the fact that the machines are claimed to be
of poor quality, most of the interviewed traders were concerned about the increased
maintenance costs:
“…In case of a problem, I have to go to my supplier and pay for service. We have a
service agreement with them and we pay an annual fee of TAS 200,000. Therefore, in
the case of any problem, we go there and our machine gets serviced…” [Trader]
Despite the concerns of the traders, it is fair to note that Reg. 20(5) of the Income Tax
(Electronic Fiscal Devices) Regulations, 2012 and Reg. 19(5) of the Value Added Tax
(Electronic Fiscal Devices) Regulations, 2010 state clearly that the expenses for
periodic maintenance of the Electronic Fiscal Devices shall be covered by each user
of the serviced device. However, to ensure the fair treatment of traders, TRA
should indicate the cost of servicing different types of EFDs. Similarly, it is
recommended that TRA conducts a survey on traders to assess whether the
delivery of the after-sales service provided by the approved EFD suppliers is
efficient. This survey would inform the TRA on the extent to which the approved
EFD suppliers provide an after-sales service as agreed in the MoU. Furthermore,
as the Government intends to supply EFDs freely to the earmarked traders, the
issue of maintenance needs to be discussed by all stakeholders. For instance, it is
not known whether the cost will be borne by the Government, suppliers or the
traders themselves and what would be the implications in terms of compliance.
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 20
3.2.7 Compatibility Issues
Some traders claimed that EFDs are not compatible with some of the systems already
in place in their businesses. As a result, it created difficulties in integrating the
systems in order to have accurate information, as one trader stated:
“You know, I have this EFD here and as a supermarket, I have my own computerised
system. But this machine [EFD] is not compatible with my system. I think they
supplied me with an old version which cannot read the system. This is very
problematic indeed. I think their machines are very outdated…” [Trader].
Similar claims have been made in petrol stations:
“…We are not against the usage of EFDs but most of them do not relate to the pumps at
our petrol stations…We will seek an audience with TRA officials and the EFD
manufacturers to see how best they can provide […] machines that can be connected to
our pumps…” [Farough Baghozah, Chairman of the Tanzania Petrol Stations Operators
Association (TAPSOA), quoted in the Daily News, 15th February, 2016] [Emphasis
Added].
As highlighted in the above quotes, a dialogue between EFD stakeholders,
including TRA, approved EFD suppliers, approved EFD manufacturers,
network providers and individual traders, could address these concerns. In this
regard, it is fair to acknowledge the efforts made by TRA to connect the business
community and the approved EFD suppliers. Therefore, the same could be done
with respect to the approved EFD manufacturers and other important
stakeholders.
3.2.8 Limited Technical Functions and Lack of Technicians
Traders were concerned about EFDs having limited functions. Their argument is that
since the machine is used for tax purposes, it should provide full details of all the
expenditure of the trader and not their sales only. It is important to note that this was
one of the major reasons behind the country-wide protest to using EFDs, which
occurred in 2014 and 2015. This is illustrated in the following quote:
“…The EFDs are not user friendly,…they only record sales made and not purchases
for example…so what good is that for the trader?….” [Johnson Minja, Chairman of
the Business Community of Kariakoo, quoted in the Guardian, 2nd April, 2014]
Since most of the traders involved in Phase II come under presumptive taxes3, they
were concerned that TRA could use their sales information to increase the amount of
estimated taxes to be paid. This also contributed to the widespread boycotting of
EFDs.
Furthermore, some EFDs, especially those installed at petrol stations, were claimed to
have recurring technical problems:
3 Presumptive tax is the system of estimating taxes applicable to sole proprietors with an annual
turnover not exceeding Tshs 20 million (Income Tax Act, 2004).
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 21
“…When the computing machines are stuck, we cannot conduct any sales since the
system does not allow it. TRA should have enough experts that are capable of sorting
out the machines as quickly as possible…” [Victoria Luande, Managing Director,
Puma Petrol Station Sea View, quoted in the Guardian, 18th March, 2015].
It was noted during fieldwork that whenever EFDs had a problem, the manager-cum-
operator disconnected them from the pumps and continued to sell fuel without issuing
EFD receipts. This was also noted in other businesses such as bureaux de change,
supermarkets and other merchandising entities. It is important to note that Reg. 18(1)
of the Income Tax (Electronic Fiscal Device) Regulations, 2012 allows users to
temporarily use an alternative means of transacting business by issuing manual
receipts or invoices where (a) the Electronic Fiscal Device is undergoing inspection;
(b) the Electronic Fiscal Device has been seized for investigation; (c) the Electronic
Fiscal Device is undergoing maintenance; and (d) the user has reported to the
Commissioner that the device has failed to operate for any reason acceptable to the
Commissioner. Even when these conditions are met, the user is still required to key
into the Electronic Fiscal Device all the information contained in the manually issued
receipts and invoices at the start of the operation of an Electronic Fiscal Device (Reg.
18(2) of the Income Tax (Electronic Fiscal Device) Regulations, 2012). This was not
observed during fieldwork. Instead, users continued to issue EFD receipts once the
machine is restored, without dealing with the transactions for which manual receipts
were issued. On this, one trader stated clearly that ‘we don’t go back and trace
manually issued receipts. It is time consuming. Once the machine is ready, we
proceed’. As most of these traders are non-VAT registered, they did not have the
incentive to make sure that all the sales are recorded in the EFDs. Surprisingly, this
practice was also noted in the study conducted on relatively large businesses (VAT
registered) by TCCIA&PAMOMA (2012), and they associated this tendency with the
time factor and the voluminous amount of transactions.
Since it is an offence for registered traders to operate a business in the country
without using an Electronic Fiscal Device (Reg. 10(2) of the Income Tax
(Electronic Fiscal Device) Regulations, 2012 and Reg. 10(2) of the Value Added
Tax (Electronic Fiscal Device) Regulations, 2010), TRA should put in place
appropriate mechanisms to ensure that technical problems relating to EFDs are
addressed promptly. Also, TRA should enhance investigation and follow up to
ensure that the previously manually issued receipts or invoices are entered into
the EFDs. Similarly, the Government and TRA in particular should consider
raising the level of awareness of breaking the law to deter purposeful acts aimed
at making EFDs dysfunctional.
3.2.9 Reluctance of the Traders to Use EFDs Machines
The findings of this research show that most of the traders were reluctant to use EFDs,
not only due to the challenges relating to the machines, but also, in most cases, traders
were sceptical about using them. This is partially noted in the following quote:
“In fact, these traders don’t like using these machines [EFDs]. This is a fact. They use
other excuses such as network problems, cost of the machines, etc., but the fact is,
they don’t like using them. Let me tell you, these are genuine machines and used only
in Tanzania but they still complain…Interestingly, when you go there [traders’
business premises] everything else is working…the computer is working, the car is
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 22
working, the generator is working, etc. It is only the EFD that is not working….…”
[Approved EFDs Supplier] [Emphasis Added].
In most cases, traders fear that using EFDs could increase their tax liability.
Surprisingly, this was noted in both VAT and non-VAT-registered traders. In the case
of VAT-registered traders, one would think that using EFDs would have facilitated
the filing of their tax returns and prove the genuineness of the claimable VAT refund.
This was not observed and the unfavourable business environment was attributed to
this anomaly:
“Yeah, it is difficult to use these machines [EFDs] in our environment. You know,
many of the things we buy come from non-VAT-registered traders who don’t give us
receipts. So, when we issue EFD receipts, we are supposed to pay VAT and there is
nowhere to claim… [Trader] [Emphasis Added].
Most of the non-VAT-registered traders come under the presumptive tax system
where tax liability is estimated using estimated annual turnover [See Appendix 1]. In
this regard, most of the traders were sceptical about using EFDs due to the fact that
their sales will be known and their tax threshold increased. In fact, this study observed
that most of the traders who are currently pay tax under the presumptive tax system
are actually generating an annual turnover above the maximum threshold of TAS 20
million. Therefore, most of the non-VAT-registered traders were also not using EFDs
as a way of reducing future tax liability. It is fair to say that it is common for traders
in the country to sell goods or offer services without issuing receipts let alone EFD
receipts. As a way of minimising pressure from TRA officials, some VAT and non-
VAT-registered traders tend to issue EFD receipts for a lesser amount. This is
reflected in the following conversation:
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 23
Box 2: Trader Convincing Customer to take EFDs Receipts for a Lesser Amount
It was noted during the fieldwork that issuing EFD receipts for a lesser amount and
not issuing EFD receipts at all were the common practice of some traders in the
country. Therefore, the overall objectives of the Government of improving traders’
business records and paying their fair share of taxes are being jeopardised. Therefore,
it is imperative for the Government, TRA and other stakeholders to take
appropriate measures to ensure that the installed EFDs are effectively used by
the registered traders in the country. In this regard, customers need to be
sensitized to demand EFD receipts whenever they make a purchase. Also, TRA
needs to increase the number of surprise investigations to ensure consistent use
of EFDs. Similarly, businesses need to be sensitized on the potential of the
machine to reduce their tax liability through having accurate and reliable
business records. In this context, the common phrase of TRA that ‘when you sell,
issue a receipt…when you buy, demand a receipt’ needs to be effectively
enforced.
3.2.10 Limited Coverage of EFD Implementation
A sense of unfairness in terms of coverage of EFD implementation was noted during
fieldwork. The interviewed traders and approved EFD suppliers were concerned that
some Government entities running businesses are not using EFDs. This is evidenced
in the following quote:
“We know that a number of Government Business Entities are not using EFDs.
Actually, they are very reluctant to use them. Surprisingly, some of these entities are
collecting VAT but don’t like to use the machines and nobody touches them. I think,
that is not fair….Yes, it is not fair…If we want to succeed, we have to treat
everybody equally … [Approved EFDs Supplier] [Emphasis Added].
Therefore, to address the above anomaly, the Government and TRA in
particular need to ensure that all Government Business Entities use EFDs. This
will not only enable the Government to collect the correct amount of tax from the
business transactions conducted but it will also enable private businesses to get
EFD receipts from these entities. Enhanced enforcement and investigation of
these entities have the potential to increase the use of EFDs. Failure to ensure
that government entities and other large entities comply with the EFD-related
Trader Convincing Customer to take EFD Receipts for a Lesser Amount
Operator: Just take this EFD receipt in case you are asked by
TRA officials
Customer: Why do you give me a receipt for TAS 145,000 when I paid you
TAS 284,000?
Operator: This is just for you to show TRA officials in case you get caught.
Customer: How can I buy all these goods for just TAS 145,000? It is
better for you to give me a receipt for the whole amount I paid you.
Owner: The guy does not understand what you are talking about. Just give him
his full receipt.
Observation Note, Kariakoo Market, Dar es Salaam, 25th April, 2016
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 24
regulations sends a wrong message to private and small traders, leading to them
justify- their reluctance to comply with the ‘crowd mentality’.
3.2.11 Weak Enforcement of the Laws and Regulations
Notwithstanding the fact that there were some challenges constraining effective
implementation of EFDs in the country, weak enforcement of the laws and regulations
also contributed to this. In fact, failure to acquire or use EFDs and tampering with
them are all punishable by law. For instance, in case of failure to acquire or use EFDs,
Reg. 21 of the Income Tax (Electronic Fiscal Devices) Regulations, 2012 clearly
states that “any person who contravenes the provisions of regulation 10 commits an
offence and is liable, upon conviction, to a fine of not less than shillings three million
or to imprisonment for a term not exceeding twelve months, or both”. Also, Reg. 22
of the Income Tax (Electronic Fiscal Devices) Regulations, 2012 clearly states that
“any person who deliberately tampers with or causes Electronic Fiscal Device not to
work properly, commits an offence and upon conviction is liable to a fine of
Tanzanian shillings not less than one million or to a term of imprisonment not
exceeding three months or to both”. Similarly, an approved supplier who fails to
discharge his/her obligation under Reg. 7 of the Income Tax (Electronic Fiscal
Devices) Regulations, 2012 commits an offence and is liable, on conviction, to a fine
of Tanzanian shillings one million or to imprisonment for a term not exceeding three
months, or to both (Reg. 23 of the Income Tax (Electronic Fiscal Devices)
Regulations, 2012).
On the other hand, customers are required to demand and retain an EFD receipt, and
failure to do so could result in a penalty. In this regard, Reg. 24 of the Income Tax
(Electronic Fiscal Devices) Regulations, 2012 clearly states that “any person who fails
to demand and retain a fiscal receipt or fiscal invoice or fails to report a denial of
issuance of the receipt or invoice as required by regulation 27 of these regulations
commits an offence and upon conviction is liable for payment of twice of the amount
of the tax evaded”. Although these unlawful practices are prevalent, very few cases
are reported4. Political interference and alleged collusion between enforcement organs
and some dishonest traders have partly contributed to this. Thus, in addition to
increased education and raising the awareness of traders, approved suppliers
and customers, TRA and other enforcement organs are advised to enhance
enforcement and make sure that those who breach EFD laws and regulations are
held accountable, irrespective of their political affiliation and social status in the
community.
3.3 Lessons Learnt from the Adoption and Implementation of EFDs
The process of adopting and implementing EFDs in Tanzania has provided various
lessons, including the following:
4 Recently, Ilala’s Resident Magistrate Court Mr. Saidi Mkasiwa gave Mr. Huifang Ma of
Narung’ombe Kariakoo a three-year prison sentence or a fine of TAS 4.5 million after being convicted
of the offence of not issuing EFD receipts to his customers and not registering for VAT [Mwananchi
Newspaper, 26th April, 2016, Dar es Salaam, Tanzania].
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 25
3.3.1 Importance of Participatory Approach:
It is clearly seen that the adoption of EFDs was not done in a participatory manner.
Given the nature of the issue and projected reactions of the business community, one
would have expected the business community to be actively involved from the outset.
On the contrary, their active ‘participation’ was only seen when they protested against
using the machines all over the country. The active participation of all stakeholders
would have minimized some of the current challenges facing traders.
3.3.2 Change Management Requires Investment
The adoption and implementation of EFDs is a change management path. Since the
traders and customers were accustomed to the old system, an aggressive campaign
would have been required to change the mind-set of all stakeholders. Unfortunately,
this was not done. As a result, major stakeholders such as traders and customers had
various misconceptions regarding EFDs. This created implementation challenges.
3.3.3 Technology Acceptance Model [TAM]
Viewing EFDs as an adopted technology, one would expect the Government and TRA
in particular to have learnt from the Technology Acceptance Model (TAM). The
model suggests that when users are presented with a new technology a number of
factors influence their decision on how and when to use it. As shown in Figure 4
below, one of the important factors is perceived usefulness (Davis, 1989). This
implies that instead of forcing traders to use EFDs as part of compliance, the
Government and TRA in particular could have invested in other variables, such as
perceived usefulness of EFDs, attitude of traders, and intention of traders to use the
machines.
Figure 4: Technology Acceptance Model (Davis, 1989)
3.3.4 Importance of Education and Sensitization Campaigns
In addition, the adoption and implementation of EFDs in Tanzania and enforcement
of their use suggest that education and sensitization campaigns are very important. It
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 26
is unfortunate that the Government and TRA realized this too late. However, the
aggressive campaigns launched early in April 2014 (three months after the
introduction of EFDs Phase II) achieved seemingly positive results, as Mr. Richard
Kayombo noted:
“…Traders across the country have been misdirected by false and inaccurate
information on the use of Electronic Fiscal Devices (EFDs) and that is why they
remain reluctant to use them despite government repeated orders to do so…To
reverse and correct the misconception….TRA is to conduct an awareness-raising
campaign across the country…” [Richard Kayombo, Director for Taxpayer Services
and Education, TRA, quoted in the Guardian, 2nd April, 2014].
In fact, the aggressive campaigns on the importance of EFDs should have begun
before the traders’ protest.
3.3.5 Importance of Appropriate Platforms
It was observed during the traders’ protest that there were no appropriate platforms
where traders could have raised their concerns. Despite the fact that trade associations
such as TTA and TAPSOA have been actively involved in negotiations, our findings
suggest that they were engaged in an attempt to end the country-wide protest.
Therefore, as the Government embarks on rolling out the usage of EFDs to different
categories of businesses, it is paramount to form appropriate platforms which can
effectively connect EFD stakeholders.
3.3.6 Tax is Burdensome for Taxpayers
Although operational challenges affected implementation of EFDs, we observed that
some dishonest traders refused to use them without any justifiable reasons. In
principle, this shows that paying taxes is burdensome for traders. Therefore,
appropriate arrangements need to be made to enhance taxpayers’ level of compliance.
Creating a conducive environment could also remove the unnecessary excuses
provided by dishonest taxpayers.
3.3.7 Importance of Investing in Human Resources
It was noted during fieldwork that a major problem in both TRA and approved
suppliers was their incapacity, although our respondents suggested that, technically,
approved suppliers were more competent than TRA officials. As a result, repairs and
maintenance as well as attending to technical problems are a problem. Thus, there is a
need to invest in human resources for successful implementation of EFDs in the
country.
3.3.8 Clear Understanding of the Implementation Phases
Although implementation of the EFDs in phases allowed learning to take place,
caution is needed to avoid complications. Taking Tanzania as a case study, the two
phases created both technical and legal problems. For instance, from the legal point of
view, it is difficult to know whether a particular EFD trader is governed by the Value
Added Tax (Electronic Fiscal Devices) Regulations, 2010 or the Income Tax
(Electrical Fiscal Devices) Regulations, 2012. This is especially the case when a
trader moves from being non-VAT registered to VAT registered and vice versa.
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 27
Therefore, to ensure the effective adoption and implementation of EFDs, an
appropriate and consistent legal and regulatory framework is needed.
3.3.9 Importance of the Media
It is important to acknowledge the importance of the media in the adoption and
implementation of EFDs. In this regard, all education campaigns and platforms need
to be communicated through radio, television, newspapers, etc. As shown in this
study, the media are important, but it depends on how they are used, as they may
guide or mislead taxpayers.
3.3.10 Unique Role of Customers
Our findings suggest that customers are very important for ensuring effective
implementation of EFD laws. As revealed in our observation [Box 2 above], some
traders are unwilling to issue EFD receipts, and even when they do, they reduce the
amount in order to declare less sales to TRA. However, most of the interviewed
customers were unaware of how to report malpractices relating to EFD
implementation in the country. Therefore, when customers are sufficiently educated
on the importance of demanding EFD receipts and the consequences of not having
them, it is more likely that compliance will improve. Also, reporting mechanisms at
TRA need to be improved to ensure that EFD-related cases are effectively handled,
preferably through a hot-line arrangement.
3.4 Opportunities and Challenges for the Dialogue Process
3.4.1 Opportunities for the Dialogue Process
Adoption and implementation of EFDs in Tanzania has created various opportunities
for dialogue. In particular, a dialogue could focus on many aspects including the
following:
i] Overall public finances and taxation policies. These could focus on various tax
reforms and their appropriateness in emerging economies and the position of
adopting EFDs in them;
ii] Legal and regulatory framework governing EFDs in the country. In particular,
a dialogue in this area could focus on the current appropriateness of the
Valued Added Tax (Electronic Fiscal Devices) Regulations, 2010 and the
Income Tax (Electronic Fiscal Devices) Regulations, 2012. The dialogue may
also focus on the possibility of aligning these two regulations;
iii] Challenges noted in the course of adopting and implementing EFDs in the
country. This could involve TRA, traders, approved suppliers, approved
manufacturers, mobile telephone companies, and other stakeholders in
dialogue, through which, it is believed, the challenges noted in this study and
in previous studies could be effectively addressed if all stakeholders were
committed to it;
iv] Role of the media in influencing the usage of EFDs. As this study witnessed,
the media were very important as they can guide or mislead traders and other
EFD users. Therefore, the dialogue should also discuss the role and position of
the media in implementing EFDs in the country;
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 28
v] Appropriate platforms which can be used by traders to raise their concerns
relating to EFDs. As this study has established, currently there is no adequate
or consistent engagement between TRA and other stakeholders. Therefore,
TRA may consider volunteering to establish EFD platforms;
vi] Roles and responsibilities of the various EFD stakeholders in the country. This
study has established that certain roles and responsibilities assigned to some
stakeholders (such as requiring approved EFDs suppliers to have offices in all
business centres) are impracticable. It is unfortunate that most of the roles and
responsibilities were designated with little involvement of major stakeholders;
and
vii] In this regard, the roles of approved suppliers, approved manufacturers, TRA,
traders, customers and mobile telephone companies should be revisited.
Therefore, this calls for a dialogue to revisit the roles and responsibilities of
each stakeholder and ensure that each plays its part appropriately.
The proposed dialogue could involve many stakeholders, such as those shown in the
Figure below:
Figure 5: Potential EFD Stakeholders to engage in the Dialogue Process
3.4.2 Challenges of the Dialogue Process
Anecdotal evidence suggests that having a dialogue on the adoption and
implementation of EFDs may face the following challenges:
i] It is difficult to fully represent traders (EFD users) due to their diversity.
Therefore, whatever representation is adopted in the dialogue process it may
still not represent all users. Therefore, care must be taken when choosing
representative users to ensure the validity of dialogue resolutions;
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 29
ii] The platform might lack a legal base and thus lack punitive powers that could
be used to enforce its resolutions. Therefore, the responsible parties might not
implement resolutions made during the dialogue process;
iii] The dialogue process is indeed useful for all stakeholders as it provides
common ground for decision making. However, stakeholders who have more
negotiating power due to their legal position, for example, may not be
interested in dialoguing since it may undermine their power or conflict with
their interests. Therefore, it is less likely that key stakeholders, such as TRA,
business licensing authorities, and approved EFD manufacturers will
participate;
iv] Dialogue involves “give and take” concerning the interests of negotiating
parties. Some interests are not easy to forgo. Therefore, it might difficult to
reach a consensus on major issues; and
v] The dialogue process is both time consuming and costly. For example, for
TRA the dialogue may delay implementation of EFDs, which translates into
less revenue being collected.
4.0 Conclusion and Recommendations
4.1 Conclusion
It can be generally concluded that the adoption and implementation of EFDs in
Tanzania has been surrounded by major challenges, which questions whether the
objective has been achieved. Some notable challenges were (1) high cost of the EFDs
(2) network problems (3) poor quality of paper rolls (4) location of the approved EFD
suppliers (5) poor quality of EFDs and weak batteries (6) inappropriate provision of
an after-sales service (7) compatibility issues (8) limited technical functions and lack
of technicians (9) reluctance of traders to use EFDs (10) limited coverage of EFD
implementation and (11) weak enforcement of EFD-related laws and regulations.
Surprisingly, most of these challenges were also noted in the previous study
conducted on VAT-registered businesses by TCCIA &PAMOMA (2012). This
suggests that large and small businesses are facing challenges in terms of EFD
implementation, which have contributed to the low level of compliance by the
business community. Since appropriate platforms which could have been used to
discuss these challenges were not available, in most cases, traders used protests and
strikes to communicate the noted challenges to the Government, and TRA in
particular. Anecdotal evidence shows that these measures worsened the unfriendly
relationship already existing between traders and the Government and/or TRA and
reduced the level of compliance even further. Therefore, looking at the adoption and
implementation of EFDs in the country overall, the following lessons can be drawn:
(1) the participatory approach is very important (2) change management is important
and should be backed up by sufficient resources, both financial and human (3) the
relevance of the TAM (4) the importance of education and sensitization campaigns (5)
the importance of appropriate platforms for dialogue (6) the realization that tax is
regarded by taxpayers as burdensome (7) the importance of investing in human
resources (8) the need to have a clear understanding of the implementation phases (9)
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 30
the media are very important and (10) customers are key stakeholders. Taking these
lessons seriously could minimize EFD implementation challenges in future.
4.2 Recommendations
4.2.1 Recommendations to the Government
The Government of the United Republic of Tanzania (URT) is recommended to:
i] Take overall responsibility for ensuring that citizens are highly sensitized and
educated on the importance of issuing and demanding EFD receipts. This could be
done through the radio, television, newspapers, brochures, leaflets, etc. Specific
training sessions and/or sensitization campaigns could also be directed at traders.
Since the previous study which focused on relatively large businesses established
that most of the users have mere secondary education (TCCIA &PAMOMA,
2012), the issue of education is even more serious now as a result of including
small-scale traders, who may not have on their staff those with basic
business/accounting/IT knowledge. Therefore, the Government and TRA should
work closely to ensure that traders are intensively educated and sensitized on the
use of EFDs;
ii] Institute appropriate mechanisms for undertaking fiscal reform in the country
without causing a negative impact on the overall economy. For instance, the
increase in the presumptive tax rate could have been delayed during
implementation of EFDs, to avoid the wrong association in traders’ minds of the
increased rate with the EFDs;
iii] Take overall responsibility for supervising and directing TRA on appropriate
mechanisms which would further improve compliance with the implementation of
EFDs;
iv] Enhance its efforts to formalise businesses in the country through MKURABITA
[MKAKATI WA KURASIMISHA BIASHARA TANZANIA]. This would ensure
that the business community in the country was treated fairly;
v] Negotiate with approved EFD manufacturers to consider local contexts (such as
unavailability of power) during manufacturing and at the same time look at the
possibility of reducing the cost of EFDs;
vi] Negotiate with approved EFDs suppliers to reduce the cost of EFDs, especially
those used by small traders and at the same time look at the possibility of offering
an affordable after-sales services to EFD users;
vii] Instruct the Tanzania Bureau of Standards to examine and certify the quality
of the manufactured EFDs and their batteries before they are supplied to the
registered traders; and
viii] Enhance enforcement of EFD laws and regulations. To do this, the courts, police
and other intelligence organs are recommended to work closely with TRA to
address unlawful practices.
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 31
4.2.2 Recommendations to TRA
TRA is recommended to:
i] Enhance the capacity of its server(s) to improve communication between EFDs and
the corresponding server;
ii] Ensure that approved EFD suppliers comply with the signed MoU including
having offices in each region in the country and providing a reliable and efficient
after-sales services at the traders’ business premises;
iii] Ensure that approved EFD manufacturers comply with the signed MoU, including
manufacturing machines based on specifications that are in line with local
contexts;
iv] Ensure that the selected telephone mobile companies as network providers have
appropriate mechanisms which would improve internet connectivity;
v] Include other mobile telephone companies as network providers to enhance
network connectivity. Currently, only Vodacom and Airtel are the approved
network providers for operating EFDs in the country ;
vi] Discuss with both the approved EFD manufacturers and approved EFD suppliers
the possibility of reducing the cost of EFDs;
vii] Prepare indicative list of the various after-sales service rates relating to EFDs as a
guide. Currently, there are different after-sales service rates charged by different
approved EFD suppliers;
viii] Ensure that only quality paper rolls are available in the market. This could be
done by phasing out poor quality paper rolls through enhancing supervision and
enforcement;
ix] Liaise with approved EFDs manufacturers to accommodate the specific demands
of users, such as those at petrol stations. In particular, users of EFDs at petrol
stations would like one machine to be connected to more pumps;
x] Enhance training of its internal staff (mainly technicians) to ensure that appropriate
human capacity is available to service and maintain EFDs;
xi] Enhance education and sensitization campaigns on the appropriate usage of EFDs
in the country. The campaigns could particularly target customers and traders and
focus on the importance of using EFDs for businesses and the country as a whole.
Since the previous study which focused on larger businesses established that most
of the users have mere secondary education (TCCIA, 2012), the issue of education
is even more serious now as a result of including small-scale traders. Therefore, the
Government and TRA should work closely to ensure that traders are intensively
educated;
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 32
xii] Monitor implementation of EFDs in Government Business Entities in the
country;
xiii] Increase the current deadline for submitting a Z report from 3 days to 7 days,
pending the necessary interventions on the network/server capacity problems;
xiv] Create a special window for submitting the Z report by seasonal businesses such
as consultancy and construction companies. On average, these businesses issue one
invoice per month and in some cases six months. Therefore, sending a Z report
daily is considered inappropriate and costly in terms of resources and time, as well
as contributing to overloading the network/server;
xv] Increase the number of surprise visits to both traders and approved EFD suppliers
to ensure consistent compliance with EFD laws and regulations;
xvi] Enhance enforcement of EFD laws and regulations;
xvii] Volunteer to form appropriate platforms for the dialogue process relating to the
implementation of EFDs in the country and participate actively in the dialogue;
and
xviii] Increase the threshold from the current TAS 14 million to TAS 20 million. The
current threshold of Tshs 14m is very low, which means that a trader generating
TAS 36,000 per day is obliged to have an EFD. This is a very small turnover and
the compliance costs might be high. Increasing the threshold to at least TAS 20
million would enable TRA to effectively collect taxes, as all targeted traders will
be above the presumptive tax system and will be required to submit audited
accounts.
4.2.3 Recommendations to the Approved EFD Suppliers
Approved EFD suppliers are recommended to:
i] Enhance the capacity of their technical staff to effectively support and maintain
the EFDs they supply;
ii] Undertake repairs, training, support and maintenance of users’ EFDs as per the
MoU entered into with TRA. In particular, all repairs and maintenance of EFDs
need to be undertaken at traders’ business premises;
iii] Open offices in each region in Tanzanian Mainland and major business centres to
effectively and promptly serve EFD users;
iv] Actively participate in the dialogue platforms to discuss issues relating to the
implementation of EFDs;
v] Respond to users’ queries promptly so as not to affect the smooth running of their
business;
vi] Charge reasonable prices for the service rendered to EFD users;
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 33
vii] Reduce the price of EFDs to an average of TAS 200,000 to enable small
businesses which are non-VAT registered to acquire them without compromising
their business operations;
viii] Reduce the price of EFDs used at petrol stations [Fuel Pump Electronic Fiscal
Printer] to an average of USD 2000. This is likely to increase compliance level;
ix] Negotiate with approved EFD manufacturers to ensure that local contextual
issues such as unavailability of power and poor connectivity are considered when
manufacturing EFDs to be used in Tanzania;
x] Reduce the price of paper rolls used by the Fuel Pump Electronic Fiscal Printer to
increase compliance level; and
xi] Liaise with approved EFD manufacturers to make sure they modify the
technology so that one EFD at a petrol station can be connected to a number of
pumps.
4.2.4 Recommendations to the Approved EFDs Manufacturers
Approved EFD manufacturers are recommended to:
i] Enhance the capacity of their technical staff to manufacture EFDs which are
compatible with the Tanzanian environment, particularly machines that last a
long time without needing external power as well as having multiple uses;
ii] Effectively undertake all the functions highlighted in the MoU entered into with
TRA;
iii] Work closely with TRA and approved suppliers on the various issues relating to
the implementation of the machines, including addressing battery and internet
connectivity problems;
iv] Accommodate the specific demand submitted by TRA of allowing one EFD to
perform multiple tasks;
v] Visit the country [Tanzania] at least once a year to get a first-hand feeling of the
usage of the manufactured EFDs and their associated challenges
vi] Actively participate in the dialogue platforms; and
vii] Charge affordable prices for the EFDs.
4.2.5 Recommendations to the Network Providers - Vodacom and Airtel
Network providers are recommended to:
i] Enhance the capacity of their technical staff to ensure availability of the network
for EFDs;
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 34
ii] Work closely with TRA and approved suppliers on the issues relating to network
connectivity;
iii] Respond to users’ queries promptly so as not to disturb the functioning of the
machines including submitting the Z report on time; and
iv] Actively participate in the dialogue platforms.
4.2.6 Recommendations to the Traders [EFD Users]
Traders [EFD users] are recommended to:
i] Enhance the capacity of their staff so that they effectively and appropriately use
the EFDs;
ii] Undertake repairs and maintenance of their EFDs promptly to keep them in good
condition;
iii] Work closely with TRA and approved suppliers on the various issues relating to
the implementation of the EFDs. These may include operational issues such as
sending the Z report, after-sales service, etc.;
iv] Comply with all the terms and conditions for the usage of EFDs as described in
the relevant legislation;
v] Actively participate in the dialogue platforms;
vi] Communicate all challenges associated with the implementation of EFDs to TRA
and approved EFD suppliers; and
vii] Issue fiscal receipts or fiscal invoices for all sales.
viii] Develop a culture of complying with tax laws.
4.2.7 Recommendations to the Customers
Customers are recommended to:
i] Demand fiscal receipts equivalent to the amount paid for the purchase of
goods and/or services;
ii] Familiarise themselves with their roles and responsibilities in the overall
implementation of EFDs in the country;
iii] Report any denial of the issuance of a fiscal receipt or fiscal invoice to TRA
and/or any other appropriate organs such as the Tanzania Police Force;
iv] Actively participate in the dialogue platforms; and
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 35
v] Communicate all challenges associated with the implementation of EFDs to
TRA, approved EFD suppliers, the media, and/or any other appropriate
Government organs such as local government authorities.
4.2.8 Recommendations to the Media
The media are recommended to:
i] Broadcast education and sensitization programmes on the importance of using
EFDs aimed at businesses and the country in general;
ii] Familiarise themselves with their role in the overall implementation of EFDs
in the country; and
iii] Actively participate in the dialogue platforms.
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 36
Appendices
Appendix 1: Tax Rates Under the Presumptive Tax System
Under this system, the tax payable is established based on the annual turnover shown
in taxpayers’ records. In the absence of complete records, annual turnover is estimated
based on the judgment of the commissioner. The turnover bands and their tax rates are
shown below:
Annual turnover Tax payable when
records are incomplete
Tax payable when records
are complete
When turnover does not
exceed TSHS. 4,000,000
NIL NIL
When turnover exceeds
TSHS.4,000,000 but does
not exceed TSHS.7,500,000
TSHS. 150,000 3% of the turnover in excess
of TSHS. 4,000,000
When turnover exceeds
TSHS. 7,500,000 but does
not exceeds TSHS.
11,500,000
TSHS. 318,000 TSHS. 135,000+3.8% of the
turnover in excess of TSHS.
7,500,000
When turnover exceeds
TSHS. 11,500,000 but does
not exceed TSHS.
16,000,000
TSHS. 546,000 TSHS. 285,000+4.5% of the
turnover in excess of
TSHS.11,500,000
When turnover exceeds
TSHS. 16,000,000 but does
not exceed TSHS.
20,000,000
TSHS. 862,500 TSHS. 487,000+5.3% of the
turnover in excess of TSHS.
16,000,000
Source: TRA (2015)
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 37
Appendix 2: Arrest of the Chairman of the Traders’ Association
Arrested in Dar es Salaam and produced in a Dodoma court
500 km away: the story of Tanzanian traders’ strike
The Tanzanian economy yesterday sustained a huge revenue loss as traders across five regions
in the country decided to close operations to push for the release of their business community
chairperson Johnson Minja. Mr Minja was arrested in Dar es Salaam for allegedly inciting
fellow traders against using Electronic Fiscal Devices (EFDs). The protest against Tanzania
Revenue Authority’s (TRA) introduction of the EFDs began last September and has seen
traders’ sporadic stand-offs with the taxman. “Electronic Fiscal Device (EFD) means a machine
designed for use in business for efficient management control in areas of sales analysis and
stock control system…” according to the TRA. But traders contest the devices noting that the
systems are built to monitor their operations so that a larger proportion of their turnover goes to
the taxman. Controversy still hovers around how a man arrested in Dar es Salaam could be
driven 500 km to be tried in Dodoma.
Mr Minja was tried by Dodoma Resident Magistrate, Ms Rebeka Mbilu, and charged with
inciting traders in the area not to pay tax using EFDs but he was later released on Sh4 million
bail. It was the second day of the strike in Dar es Salaam. According to the Citizen newspaper,
yesterday in Dar es Salaam, traders at the busy Kariakoo market continued their sit-in, and
vowed not to resume business if Mr Minja was not released by the police. Traders closed their
shops and mingled in the streets as a police van went round asking those not working to go back
home. A trader, Mr Vicent Msele, said they were losing millions of shillings but would not open
unless their leader was set free. In Songea, (the capital of Ruvuma Region in south-eastern
Tanzania) traders said they would close their shops indefinitely unless Mr Minja was released.
“We’ve collectively agreed to strike since we can’t feel free to continue operating while our
leader whose offence is unknown is still being held,” one trader told the Citizen newspaper.
Authorities in the capital also noted that the strike had caused a larger proportion of the negative
impact on the commercial operations of the municipality. Ruvuma regional trade officer Furaha
Mwakangala said they were following up the matter closely as the boycott had affected
commercial activities in the municipality.
Ruvuma Chamber of Commerce, Industry and Agriculture (TCCIA) secretary Philemon Moyo
said the strike had affected innocent consumers. In Mbeya, (a city located in the south-west)
traders closed their shops in areas around Soweto and Sido markets, claiming that they did so to
participate in a meeting to discuss problems associated with the taxes charged by different
authorities. It was the second time traders had gone on strike in one month. The situation was
the same across different regions and traders called upon the tax authority to resolve the impasse
between them.
Eastafricadaily, 29th January, 2015
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 38
Appendix 3: Picture of EFDs [Sample]
A Study on the Introduction and Adoption of EFDs by Business Community in Tanzania: Page 39
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