Ministry asked for sales machine upgrade


Sales register machine manufacturers are calling on the government to utilize the latest technology in order to maintain the accuracy of the machines and increase tax revenue.
Cash register machines were introduced at the beginning of 2008 in Addis and currently are in use throughout Ethiopia with many businesses now operating them. Experts say using the machines properly allows the government to trace business sales and obtain accurate direct and indirect taxes. Even though the number of sales register machine users is increasing, machines are using outdated technology and can be subject to fraud.

Recently the Ministry of Revenue (MoR) disclosed that some machines disappeared and there are increasing requests for vat refunds. Some businesses ask for vat refunds by coming up with unknown and illegal receipts that come from missing machines. This cheats the government out of revenue.
If the government can improve the sales register machines’ security and technology it will go a long way to increasing revenue, a source who works in tax collection said. “Improving the system and usage of the machine by itself expands tax collection and tackles fraud,” they insisted. They want MoR to improve the technology to make a stronger controlling mechanism.
For instance, by using latest programs and technology MoR can trace the activity of any sales register machine besides identifying the location of the machine.
Some machine and software suppliers that asked not to be named support the idea of improving technology and using current products to enhance tax collection and reduce the tax evasion.
“The sales register machines the country uses is a ten-year-old technology,” they said.
“Improving this is very simple and can be managed by local workers and programmers with no or limited expenses by using modern technologies, it is easy to find the location of the missing machines. Even modern technologies allow machines to be installed by locking when moving from area to area,” the expert added.
Another experts points out that other countries change their sales register machines at least every five years, “but in our case the technology that is supposed to be improved has not changed for 11 years.”
Currently MoR and the association of sales register machine and software suppliers have formed a joint committee to improve the machines. “Even though the committee has been formed and some activities have started both sides have to work aggressively to modernize the machines and solve problems like importing equipment and technological modernization,” one person working in the sector added.
They have also claimed that a consultant at the at the ministry, hired by donors, is not giving adequate support to MoR regarding the machines. “The ministry should look into this,” they underlined.
Revenue collection insiders say they are pleased with the changes at MoR since the coming of Adanech Abebee to the ministerial post. The last nine months of the fiscal year have seen record tax collection. Several changes and improvements have also occurred with the tax collection office in the past few months.
Sources at MoR told Capital that a study on the machines indicates that modernization is crucial to realize the expected performance.
“We have proposed a solution but I think the higher body is not ready to change the system in the near future,” a source who is close to the case told Capital, “They have resisted modernization maybe they are not comfortable about the possible costs required for change.”
Experts at MoR, who requested anonymity, suggested that the cost of changing and modernizing the sales register machines would not be a major issue. “Modernizing the machines means more revenue for the government so the cost will be covered by more revenue collection from a more modern system that maximizes the government’s revenue,” they argued.
Technology suppliers have also placed their finger on a foreign consultant who supports the ministry. “The tax body should evaluate the performance and results that it has obtained since an individual consultant was hired to the post,” they argued.
Zemede Tefera, State Minister of Revenue, told Capital “We are working on short, medium and long term plan to see changes.”
The existing technology drawback has to be evaluated in detail, while the diagnostics have been conducted. There are several stakeholders like technology and machine suppliers, Ethio Telecom, the tax office itself and the machine users in the area and we have seen gaps on all sides, according to the state minister.
“We have to see if we can manage the gaps and correct them more than the current capacity before any further decision,” he added.
After applying the correction to the existing technology and evaluating the performance, we shall use it as an exit strategy for further technological shifts.
“The technological change may have a significant cost since it may recommend we change the existing machines,” Zemede said.
I cannot give the exact period when the technology will be modernized, but according to our plan we have the goal of solving the problem in stages.
In the short term we will solve some challenges by the end of the current budget year and then again by September. Adopting new technology requires a preparation period. We can make a decision about that in the future based on our short term activities.
Some experts indicate that the issue needs a decision from the higher level even from the Prime Minister since the issue is crucial for the country’s tax collection improvement.