Monday, April 14, 2014

ELECTRONIC FISCAL DEVICE (EFD), ECONOMIC SANCTION/ CONDITIONALITY AND TANZANIA INDUSTRIALIZATION

QUESTIONS: 
A)  Explain the reasons for TRA to introduce EFD (Electronic Fiscal Device) its impact and mitigation to avoid conflict between business owner and government.
b)  Explain the impact of Economic Sanction/Conditionality to the developing countries:-
C) Explain when and why was Tanzania Industrialized?



A) Explain the reasons for TRA to introduce EFD (Electronic Fiscal Device) its impact and mitigation to avoid conflict between business owner and government.

INTRODUCTION
The Electronic Fiscal Device (EFD) has been introduced to VAT registered traders under the "The Value Added Tax (Electronic Fiscal Device) Regulation, 2010" - Subsidiary Legislation, Government Notice No. 192 published on May 28, 2010, and enshrined in the Finance Act 2010 with the main aim of enhancing VAT compliance in Tanzania. TRA’s new EFD system became effective on July 1, 2010 (Finance Act, 2010). The system aims at allowing the taxman to get correct sales information from business people; reduce tax collection costs and helping business people to comply with the Value Added Tax (VAT) regulations among others in Tanzania (http://www.amazon.com/Challenges-Electronic-Devices-adoption-Tanzania).

Tanzania Revenue Authority started to implement the second phase of Electronic Fiscal Devise (EFD) in 2013 with the aim of boosting revenue collections and simplify tax administration. Tanzania Revenue Authority (TRA) introduced the use of Electronic Fiscal Device for issuing receipts and invoices for every sale made. The System was planned to be implemented in two main phases. The implementation of phase one begun in July 2010, involving only VAT registered traders (Kagoro, V, 2010).

The Second Phase is intended to cover non VAT registered traders. Implementation of the second phase of EFD shall include the following groups;
i.                    Persons who are not VAT registered with a turnover ranging from TSHS 14 million and above per year;
ii.                  Traders trading in the Region’s prime areas, identified on the basis of rent payable;
iii.              Traders dealing with selected business sectors such as Spare Parts, Hardware, Mini Supermarkets, Petrol stations, Mobile phone shops, Sub wholesale shops, Bar and Restaurants, Pharmaceutical  Stores; Electronic Shops etc.

Tanzania Revenue Authority proudly launches the second phase of Electronic Fiscal Devices (EFDs) on May 15, 2013, in order to better cover Tax collection from non-VAT registered traders. It is the first Revenue Authority to implement such a technologically advanced solution with GPRS based Fiscal machines providing two way communications between a very advanced Server Software called EFDMS and Fiscal Cash Registers. This will streamline Tax information from over 200,000 traders (http://www.youtube.com/Electonic-fiscal-device/tz).

Definition of the key terms
Electronic Fiscal Device (EFD) means a machine designed for use in business for efficient management controls in areas of sales analysis and stock control system and which conforms to the requirements specified by the laws, (TRA, 2013).

Types of Electronic Fiscal Devices (EFDs)
1.     Electronic Tax Register (ETR)
This is a kind of device used by retail business that issue receipts manually
2.     Electronic Fiscal Printer (EFP)
The device is used by computerized retail outlets. It is connected to a computer network and stores every sale transactions or details made in its fiscal memory.
3.     Electronic Signature Device (ESD)
The device is designed to authenticate by signing any personal computer (PC) produced financial document such as tax invoice. The device uses a special computer program to generate a unique number (Signature) which is appended to and printed to every invoice issued by the user’s system.

The following is the reasons for TRA to introduce EFD (Electronic Fiscal Device):-
Electronic Fiscal Device simplifies collection of taxes and paying of taxes. Electronic Fiscal device help TRA to collect easy taxes from traders through EFD and also simplifies payment of taxes from the traders whereby payment being done online recording. These machines have wireless connection between customer's central servers which showing the exactly amount for traders to pay. It reduce misreporting of data which is done by traders so as to escape paying of taxes to the government hence Electronic fiscal Device become the solution on collection for taxes by showing real amount to pay traders.

Save time and cost. Electronic Fiscal Device saves time to the management of TRA the whole process of collection of taxes because all business people have to pay their taxes through online. Also it reduces the cost of TRA management to use a lot of time to search for the traders who does not pay taxes because each and everything is done through online. Also on the side of traders help them to reduce cost of transport and time to pay for taxes in TRA, but through that tax payment is done through online.

 IMPACT OF ELECTRONIC FISCAL DEVICE (EFD)
The following are the positive impact of Electronic Fiscal Device:-
Electronic Fiscal Device simplifies collection of taxes and paying of taxes. Electronic Fiscal device help TRA to collect easy taxes from traders through EFD and also simplifies payment of taxes from the traders whereby payment being done online recording. These machines have wireless connection between customer's central servers which showing the exactly amount for traders to pay. It reduce misreporting of data which is done by traders so as to escape paying of taxes to the government hence Electronic fiscal Device become the solution on collection for taxes by showing real amount to pay traders.

Save time and cost. Electronic Fiscal Device saves time to the management of TRA the whole process of collection of taxes because all business people have to pay their taxes through online. Also it reduces the cost of TRA management to use a lot of time to search for the traders who does not pay taxes because each and everything is done through online. Also on the side of traders help them to reduce cost of transport and time to pay for taxes in TRA, but through that tax payment is done through online.


The following are the negative impact of Electronic Fiscal Device (EFD):-
It lead to conflict of conflicts, The process of the government to introduce Electronic Fiscal Device and force traders to buy it, creating the conflict between the government and traders whereby trader oppose the use of Electronic Fiscal device by stopping opening their shops and small business conducting.  This is because; government fails to provide enough education to traders who required buying the machine of EFD and what amount of capital needs so as to have that machine as a result traders opposed through demonstration. For example in September, 2013 Mbeya Traders opposed the use of EFD by stopping opening their shops and small business, Morogoro in Second week of November and In Dar es salaam in 18-20-11-2013 one week after Morogoro demonstration (http://www.kigalikonnect.com). 

It discourage business conducts among small traders, Due to its cost in buying EFD discouraging some small business people to participate on trading because the amount of capital invested and amount of machine (EFD) is quit difference. These machine sold 800,000/= per each one and if any person opposing using of this machine he/ she will be charged to pay three millions (3,000,000/=) or One year to three years on jail or both of them go together (URT, 2010).

The following are the mitigation to the problem related to Electronic Fiscal Device between Business owner and government:-
Mass education, the government through TRA should have a tendency of providing enough education to the people in order to make them become aware on what is going to be introduced and it’s important to the people including traders. This will help much to avoid conflict that can arise between government and business owners.

Increasing people’s involvement on decision making, TRA should involve people in whole process of Tax collection, new changes and arrangement of Taxes, as well as the use of Electron Device on Business. The involvement of people especially traders and other stake holders will help to reduce the misunderstand between the business owners and the government as happens now days.

Reduce the cost of buying Electronic Fiscal Device, The government should minimize the amount of buying EFD machine in order to all both traders with low and high capital to afford it or distribute freely and through indirect way. Now days Electronic fiscal Device has been sold 800,000/= as announced by TRA 2013 which is too closetful among small business owner.

Conclusion
Electronic Fiscal Device is a machine which helps TRA easily to collect Taxes than the previous time if they will use a proper way or methods of convicting people on the importance of this better instrument. What to do is that, government should provide EFD freely or in small amount of money to both small and high business owners and those who will be neglecting to use EFD should severely punished. 
















B)   Explain the impact of Economic Sanction/Conditionality to the developing countries:-

INTRODUCTION
Conditionality is most often associated with aid money, debt relief and bilateral aid. International organization such as international Monetary Fund and World Bank or individual country can use conditionality when lending money to another country (www.investopedia.com). Economic sanction may include various forms of trade barriers and restriction of financial transaction. 

Trade sanctions are trade penalties imposed by a country or group of country on other countries. The reasons for economic sanctions/ conditionality including; management of fund from donors, for instance due to corruption in Uganda, Donors stopped to sent their grant/ aids and loans to that country, and Last reasons is to help developed countries exploiting developing countries in term of resources such as minerals, as well as land for investors.

Definition of Key terms
Economic conditionality is the restriction upon international trade and finance that one country imposes on another for political reasons (www.investorword.com). 

Economic Sanctions are domestic penalties applied by one country or group of countries on another country or group of countries (www.businessdictionary.com).
The following are the impacts of economic sanctions/ conditionality to developing countries:-

Develop neo-colonialism, economic sanctions or conditionality given out by IMF/ World Bank and developed countries cause to the persist of neo-colonialism in developing countries for instance on economic domination including on the Market domination, and controlling of the available resources such as minerals like gold, copper, coals, and gases. Although colonialism was eliminated in Africa but still neo-colonialism exists due to the economic conditionality whereby African countries may require being under the control of developed countries.

Increase economic dependency, also economic sanctions cause to the increase of economic dependency especially to the developing countries for example by depending aids from developed countries or western countries such as economic aids, this can cause the developing countries to remain with economic dependency.

Un employment become high, economic sanctions or conditionality provided by IMF/ World Bank and developed countries led to unemployment particularly to the developing countries for example through these conditions people from developed countries can prefer to invest in the developing countries where they use machine in production and sometimes may prefer to employ expertise from their home countries for instance Chinese and by doing so they cause high unemployment to developing countries.

Destruction of internal market, conditions given by the developed countries can cause the destruction of internal market for instance when these sanctions based on the free importation of goods from outside to developing country can destruct the internal market which relay much on local goods.

Exploitation of resources, economic sanctions or conditionality kept by the developed countries to the developing countries may lead to the exploitation of available resources for example conditions which are given by International Monetary Fund (IMF) and World Bank towards development programs in developing countries such as Tanzania if are not followed effectively this may lead to the punishment in one way or another including taking the available resources such as minerals and other resources.

Increase of national debt, economic sanctions can cause to the increase of national debit simply because the loans from developed countries always come with various conditions including high interest rate which can be difficult to fulfilled by the developing countries due to low economic level and sometime can led to the increase of nation debt.



Conclusion
The only way to be far from world economic conditionality to developing countries including Tanzania is to use our resources properly so as to increasing the economic status of developing country. By doing that, these countries can be independent in term of economic and these can reduce economic exploitation from developed countries. 
















C) Explain when and why was Tanzania Industrialized?

INTRODUCTION
The industrialization of Tanzania started soon after independence 1960s. Tanzania’s first comprehensive industrialization effort began with the first five years plan in 1964. While continuing with an emphasis on the agricultural sector also with adoption of the Arusha declaration policy in 1967, the government set a new course in industrialization strategy consistent with Tanzania socialism and self- reliance. The declaration stipulated two principles that must be adopted in the future industrial plan such as (1) the future strategy should not be significantly dependent on foreign investment and (2) private ownership of industry must gradually be substituted by state ownership in the form of parastatal corporations.

However in 1974 the government laid down the third five years plan more drastic measures for structural changes in the direction of self-reliance. Effort for industrialization would be aimed at the processing of agricultural products and import substitution of basic needs of human life for the majority of the Tanzanians, (www.kellogg.nd.edu/.. /087.pdf).

The following below are the reasons to why Tanzania industrialized:-
The development of industries in Tanzania associated by deferent factors, and the combination of those factors led Tanzania to be industrialized in some extent. The following are the reason to why Tanzania industrialized:-

Availability of fuel and power, Tanzania had developed in industries because of availability of fuel and power which were used to run various machines within the certain industries. Due to the availability of power supply and fuel in Tanzania increased the number of industries including Mbeya Textile Industry, Morogoro Textile Industries, Morogogo Tobacco processing industries, Tunduru and Mtwara Cash nuts processing industries, Urafiki Textile Industries, Mafinga Tea Industry, and Mbeya Agricultural tools industry.

Availability of capital, Due to availability of financial capital in Tanzania, the government in collaboration with outsider stakeholders they decided to invest on industries because capital invested helped to buy raw materials, fuel and power, and to buy various machines which were industries. So, availability of capital influenced the development of industries in Tanzania from 1960 until today.

Availability of labour, Human resources both skilled and unskilled influenced the development of industries in Tanzania since independence because both worked in industries and busting to produce enough goods so as to increase the sustainability of our industries. Also industries like cash nuts industries, tobacco industries, and cement industries in Tanzania need high labour to develop that’s why both skilled and unskilled required hence the contribution of man power within those industries existed from independence until today influenced the development and the survival.

Availability of raw materials such as sugar cane, tobacco, sisal, Cash nuts, Tea, and cotton led to the industrialization in Tanzania, this means that due to the availability of raw materials the Tanzania government saw its better to introduce industries which could produce goods such as sugar, clothes and sheet papers to its people rather than depending from the abroad nations.  

Availability of Market, Availability of market for goods producing and processing in our industries influenced the development of industries in Tanzania. Markets such as internal and external market influenced industries to produce more product and services to the people so as to satisfy they daily demands where in other hand industries gained capital for running various machine and buying raw materials.

Contribution of Mwalimu J. K. Nyerere, the first president of Tanzania contributed on prosperity of industry in Tanzania. He used to organize people to work hard in different sectors such as in agriculture, fishing and mining where those products found were used in industry. The encouragement on industry was done simply because he wanted to increase the nation income of the country through exportation of goods as well as those products which were prepared for future use.

Conclusion
Generally, Tanzania is in the process of industrialization because we are still continuing on agriculture as a backbone of the nation than investing on industries. Untill today the tendence of import is high compared with export. Tanzania through agriculture we produce raw materials such as sugar cane, tobacco, sisal, Cash nuts, Tea, and cotton but we export outside because we have destroyed our industries under an umbrella of privatization whereby investors changed its function and nowdays most of those industries created after independence have no function. 

What is recommendation to the government is to increase the number of industries rather than depending on agriculture as a back born of our nation. These industries construction should goes hand in hand with new industrialized policies which will help to bust Tanzania to be one of the leading industrialized countries in the world.  

REFERENCES
Kagoro, V, (2010), Electronic fiscal services and tax administration systems among business
            Taxpayers in Arusha municipality, mainland Tanzania, Dar es Salaam press.
URT, (2010), Subsidiary Registration 2010, Printed By Government, Dsm
Retrieved from: www.investorword.com
Retrieved from: www.kellogg.nd.edu/.. /087.pdf
Retrieved from: Mwalimu J. K. Nyerere, 1995

Tanzania Revenue Authority (TRA), Retrieved: http://www.tra.go.tz


Written By AUSI CHIWAMBO (2014)-Teofilo Kisanji University

5 comments:

  1. It's very flattering that the state of Tanzania is up to technological reforms, such as using electronic signature. Hopefully it won't be just a cheap imitation of the West, but a long term effective solution.

    ReplyDelete
  2. It Is about a week now, The System have stopped without public awarenes thus causing misunderstand among stakeholders. TRA should issue a public notice whenever their Servers are down so that EFD users may not incur costs of sending machines to suppliers and pay for repair services which is not even provided as the problem is in the TRA Server.

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  4. EFD are beneficial for both tax payer and the Authority, as it gives a tax payer a satisfaction and voluntary tax compliance and also it speeds up the revnue collection at lower cost,

    such a useful knowledge, and by the way now days there are many suppliers of EFD and guess what the prices are lower that the anounced ones, check on this link for your purchase www.compulynx.com

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