Rwanda Revenue Authority is set to open up the market for the suppliers of Electronic Billing Machines (EBM). This comes after an initial 800 machines were distributed free of charge to selected businesses around Kigali.
Following the introduction of legislation requiring all businesses to keep their books properly and also improve tax compliance, enterprises that are required to pay VAT will have to install an EBM. The measure, which aims at stopping tax evasion, also obliges these businesses to provide customers with certified receipt for every goods or service.
There are over 7000 VAT registered taxpayers.
The 800 EBMs that are already being used in Kigali for the pilot phase were supplied by Inzonvou Technologies Ltd and Pergamon Group Ltd, but now RRA will open up the market and let entrepreneurs decide for themselves from which authorized supplier to purchase their machine, provided it includes two main components: a Certified Invoicing System (CIS) and a Sales Data Controller (SDC).
"We are now opening the market for the certification of more suppliers to provide cash register machines and sales data control machines. The opportunity to supply the EBMs is open to any eligible company, "said Placide Kibogo, EBM assistant manager at RRA.
So far, 7 suppliers from different countries have confirmed their interests while several others have made inquiries. RRA has not set a limit to the number of suppliers, as long as the machines they sell meet the requirements. Those companies that qualify to provide the EBMs will be listed on the RRA website (www.rra.gov.rw), and the list will be updated regularly as more suppliers join.
Cost of EBMs
The cost of each EBM distributed free of charge by RRA to selected businesses in Kigali ranged between Frw 200,000 and 300,000 depending on the type.
From now on, the prices will be determined by the suppliers but businesspeople will not have to worry as there will be many providers, and RRA believes that this will result in competitive prices and quality machines as well as maintenance costs.
"Suppliers will operate independently and will deal with their clients directly, but the machines will have to be certified by RURA and the Bureau of Standards first. Suppliers will also determine the prices of these machines and maintenance costs but business owners will enjoy competitive rates as there will be several providers," said Charles Kabera, head of RRA's risk management division.
New VAT law
The introduction of EBMs draws its legal mandate from the new VAT law published in the Official Gazette of 05/02/2013 as Law N°37/2012 OF 09/11/2012 establishing Value Added Tax.
The law's article 1 explains its purpose as being to establish the value added tax on supplies of goods and services in Rwanda as well as on imported goods and services from outside Rwanda.
Article 3 mandates RRA to deduct VAT from all taxable goods and services as well as taxable imported goods and services. However, the law requires RRA to compute the amount of VAT charged on taxable goods and services or imported goods and services by applying the rate specified by law to the value of the goods/services being taxed.
In Rwanda, RRA charges a rate of 18% on all taxable goods and services, although some goods or services are zero-rated or exempted from VAT.
Benefits of using EBMs
Unlike the use of the manual systems, EBMs will be beneficial to all parties involved - the taxpayer, the consumer and the State.
To the taxpayer:
With the use of the EBMs, business owners will be able keep track of stock. All items purchased are automatically entered in the system which makes it easy to know what has been sold and how much is remaining.
Since every transaction is recorded in the system, the use of EBMs will reduce financial embezzlement in businesses, as well as corruption and other malpractices like smuggling out of items by employees. With electronic billing, the transactions recorded in the system must correspond with the money collected.
The system provides a tailor-made bookkeeping solution where once every sale detail is filed in the device, the data are recorded in the system and immediately communicated to the RRA system. This will help the entrepreneur to be a better tax complier and help in steering the growth of our country.
The EBMs will also promote fair competition on the market. Where in the past some enterprises evaded taxes hence earning illegal profits, the system will ensure everyone earns his due and pays what belongs to the government hence promoting fairness.
Taxpayers' views on EBMs
The EBM system has already been introduced in Kenya, Tanzania and Ethiopia, where it was well received. While it is still early days, in Rwanda too the introduction of EBM has been welcomed by the business community.
Paresh Bhatt, IT Manager, Prime Impex Ltd
"We started using the EBM in April and it is very easy to use and also efficient in terms of compiling reports and sales records. And once everyone is using the EBM, I hope there be no cases manipulation as it provides 100% declaration of total sales," Bhatt said.
He also said that there will be fair competition among businesses since they will all be paying taxes. Companies that dodge taxes tend to have a price advantage over those that pay taxes, hence creating unfair competition, Bhatt observed.
Amina Goddin, Assistant Cashier, MS Computers
MS Computers has been using EBM since March, when they were first introduced.
"As a Rwandan who knows that paying taxes is good for my country, I can say that this is one of the best initiatives by RRA," Goddin said. "It has also helped to improve our record keeping and saved time compared to the past when we had to do everything manually."
To the consumer:
Thanks to these secure devices, citizens will know exactly how much they paid for goods or service and the tax burden will be clearly justified.
It is therefore paramount for consumers to insist on a receipt for whatever good or service they purchase. All receipts produced have a special electronic signature which can be verified by RRA or the consumer. This again ensures transparency.
To encourage this practice among consumers, RRA will introduce a competition where citizens with the biggest number of locally issued receipts get rewarded.
If you demand a receipt it means the seller will have to use the EBM to issue one, and this also means the VAT tax, which is compulsory anyway, is deducted, it means as a citizen, you have contributed to national treasury hence to growth.
To the State:
Domestic taxes are important sources of revenue for any country. It's from these taxes that the government gets money to provide its citizens with public goods and services such as security, health, salaries to government workers and many others. The bigger our domestic tax base, the better the country's chances of becoming financially independent and reduce reliance on donor aid.
While there are thousands of compliant and honest taxpayers, there are those who are also determined to evade taxes hence leaving the tax burden on a few.
The successful implementation of EBMs will greatly help RRA in redeeming taxes from over 7000 VAT-registered taxpayers. It will also help the body to better tackle tax evasion taxes.
The system will also improve the relationship between taxpayers and RRA as the tax reporting will be straightforward as well as tax deductions.
Finally, it will reduce RRA's overhead cost of sending dozens of auditors to the field to track down taxes, considering that the data from the EBMs are automatically shared with the tax body.
Any new system comes with some challenges but RRA is doing everything possible to make sure the users of EBM adopt it very fast. Here are some of the challenges that RRA has already identified:
Taxpayers who close their businesses and open new ones. Others also change their TIN number.
Taxpayers failing to pay monthly subscription to maintain the remote audit service. This is a challenge to back RRA office monitoring.
Taxpayers who abuse the refund option.
Those who make fewer receipts than what is sold. This is mainly common in late night operating businesses like restaurants and bars.
Businesses operating multiple sales outlets, but this can be solved by acquiring additional machines.
Those who acquire the EBMs but do not use them.
Varying VAT rates
Failure to keep the machines charged or powered.
Since the launch of EMBs in March, RRA has been organizing training sessions for business owners and cashiers to make them familiar with the new system
"We carry out training sessions in two phases: before and after acquiring the EBMs. We usually organize them in groups of 20 people, and after they have got the machines, RRA staff together with the supplier provide more practical training to make sure that the person is ready to use the machine," said Charles Kabera, head of RRA's risk management division.
The EBMs are also fitted with a training option whereby a person already conversant with the machine can train his colleagues.
EMBs also have copy and refund modes. This helps RRA staff to notice and note simple mistakes made especially when they have already been commissioned for use.
RRA is also currently organizing training sessions to those who received the EBMs free of charge during the pilot exercise.
"Training to these who are already using the EBMs is meant to make them get to know about the ministerial order and also to with the experience and the challenges," Kabera said.
The tax body also offers specialized training sessions to individuals who visit their offices and there is also an option of contacting the call centre on the toll free number 3004.
New initiatives to facilitate taxpayers and ensure compliance
The introduction of EBMs is only one of several initiatives by Rwanda Revenue Authority to ensure tax compliance by making tax declaration and payment easier. Others include:
E-filing and E-payment to ease compliance costs on administration and taxpayers
Electronic Single Window for easy customs clearance of goods
Electronic Cargo Tracking Equipment for cargo protection while in transit
Mobile declaration and paying of taxes for small taxpayers
The Gold Card scheme system to facilitate compliant taxpayers