Are free EFDs an exercise in futility?

24Jan 2016
Guardian On Sunday
Are free EFDs an exercise in futility?

TOP officials at the Tanzania Revenue Authority (TRA) told this newspaper on Friday that they are looking for close to 100bn shillings to finance procurement of electronic fiscal devices for use by traders all over the country, as a follow up on an earlier directive by President John Magufuli.

EFD's machines

The president issued a vow to supply EFDs free of charge, so as to end months of tension between the government and the city trading community, and in several major urban areas. Briefly, the sums are being added up on that promise but it appears that the ordinary taxpayer is being billed much higher than was expected.

At the time that this announcement was made, many people thought that the costing of such an exercise would be something routine and manageable for the government, without breaking into its safes to finance that exercise. Now it appears that a hefty budget sum is being required for the purpose, which raises issues of equity, as to whether the best way for the government to spend sh100bn at present is to give free commercial gifts to the business sector. This question is pertinent as the sum is far too huge to be spent on the far less needy, even much more obliged to pay for services like big traders.

Were it that the machines cost a tenth of that amount and public institutions are at loggerheads as to what they really cost, ending the dispute by a gesture of consideration or even charity is not a bad idea, as it wouldn’t cost much to the public coffers, and meant for a whole breadth of stakeholders. But when it involves a sum of money often adequate to run a whole ministry, not speak of administrative regions, then there is something amiss about that arrangement, for it can’t be justified merely as a presidential gesture. At that level of costing, this is something that must be properly budgeted for, at the very least,

Now that the matter is revolving around costs once again, it is worthwhile going back to basics as to how the matter arose, and figure out if there is new wine in old bottles in how the TRA is handling that issue. First there is the issue of needing about 200,000 such machines, implying that there are up to 100 streets in the main urban areas of the country where there are an average of 2,000 shops of that kind in each such street, or conversely, 2,000 streets with 100 such shops. Both these figures or sets of figures look quite implausible, in which case what is being targeted by that announcement is… disbursements.

When it comes to supermarkets for instance, which use a series of such machines, they purchase them for themselves and started well before the requirement spread out, though they were probably not linked directly with tax authorities by software. That is the change at present, and if supermarkets which by definition must put up higher numbers of staff to check shoplifting or helping relatives to easy buys, can afford to purchase such machines and indeed a whole series of them in a supermarket, why can’t other traders put up single machines for their daily sales? Why give a millionaire a Sh100,000 cash gift?

The trouble doesn’t seem to lie in the pricing, and thus the solution isn’t supplying the machines free of charge, but the sort of tax rates that the TRA charges via the machines, and indeed the principle itself, whether the government ought to see every transaction the trader is making. There is still some grace period in situ, as the government has just come into office and has been combating tax evasion, massive embezzlement of public funds and wrongful expenditure. But some issues appear to have been postponed while waiting to explode once again. If TRA procures the machines in bulk, why should they be costly? How can touch phones cost as low as Sh50,000 and newer desk calculators cost Sh500,000? Is extensive software involved in fitting a message channel to a desk calculator? Is the price not a set up?