Development of electronic fiscal device stock tracking module to monitor tax evasion in Tanzania

Abstract

The Electronic Fiscal Device (EFD) Machines have been operating in Tanzania since the year 2010 for the purpose of helping the Tanzania Revenue Authority (TRA) to increase revenues from tax collection. Regardless of years of its existence, there are still reported cases of tax evasion and this study was conducted to review the current tax collection system and analyze requirements for the development of Stock Tracking Module (STM) to be embedded in the current tax collection system. Data collection was done in Kilimanjaro and Arusha the two regions of Tanzania involving tax officers and Information Technology (IT) personnel from TRA regional offices. This study opted pharmaceutical business as case study due to its sensitivity to human health and the fact that, its regulatory authority’s database can be linked with the developed system to track expired and fake drugs in the market. Data collection process involved quantitative and qualitative methods to gather information for the development of the system’s Stock Tracking Module (STM) such as interview, questionnaire, role-playing and observation. The study earmarked some problems relating to Electronic Fiscal Device Machine Management System (EFDMS) and EFD machine. The major problems encountered by TRA are; under declaration of sales by traders, non-usage of EFD machines, usage of fake EFD, overestimate of expenses, division of business and conducting business in unknown areas. The main outcomes of the study: The efficiency of the EFDMS was at average, thus, needed some improvements. Therefore, this study developed an enhanced EFD system by introducing stock tracking capabilities to monitor traders’ actions that translate to tax evasion in such ways as; underpricing of sales value, avoid using the EFD machine and use of fake EFD system which consequently increase government revenues.