E-invoicing - a sustainable solution to ensure VAT collection
07 June 2016
The Togolese Revenue Office (OTR) announced that it is continuing its reforms to combat fraud in all its forms. As part of this campaign, the standardised invoice was introduced to the Imports Commission [Commissariat des Impôts] and zero tolerance was announced for invoicing in any other format. The stated objective was to render the business climate more competitive and reassuring for all business operators whether they be in Togo or in the sub-Region.
According to Esso-Wavana Adoyi the Imports Commissioner of the Togolese Revenue Office, the main point of the exercise is that its use will permit better collection of VAT and allow disputes to be resolved between a business and its client, for example, after the purchase of a product. The standardised invoice is also the way to oblige companies to submit the VAT levied on goods and services to the government.
While the standardised invoice may improve invoicing matters in Togo, the only real way to reduce tax evasion, the cost of tax collection and simplify the management and monitoring of tax to be paid is through e-invoicing. Paper invoices cost a lot to administer and it is easy to commit fraud when they are used. E-invoicing, however, is real-time invoicing and would put a stop to all these fraudulent activities in Togo as well as making life easier for the Regulatory Authorities.
Tax compliance is a worldwide issue but it is particularly problematic in developing and emerging countries where the difference between the tax (VAT) due to the State and what is actually collected is 50% to 60%, compared with 7% to 13% in developed countries. In Africa alone, an estimated US$50 billion is lost each year due to fraud and tax avoidance. Governments must be at the forefront of initiatives to develop the necessary capacities in their countries because, as a result of this, governments are missing out on a huge amount or revenue which could be employed to:
- put in place modern and progressive tax systems
- finance development projects
The real-time electronic invoicing—also called e-invoicing— which Avatar Technologies can make possible could be a real boon for the government of Togo. To encourage tax compliance, it is also possible to embark on innovative initiatives such as receipt-based fiscal lotteries, as several African countries have done.
While obtaining a receipt for any legal transaction does not cost the consumer anything extra, it becomes valuable as it serves as lottery ticket. In this way, transactions are more likely to be part of the official (not the shadow) economy and VAT can be collected by the tax authorities. For the tax authority, the cost of paying lottery prizes and administering it is, in turn, far outweighed by the extra revenue of an increased tax base and by the citizen-policing effect of detecting VAT-dodging businesses.
The electronic fiscal solution Avatar Technologies can provide for the Togo government would standardise and simplify internal processes, close major VAT loopholes and improve collection procedures. Avatar’s EFD solution represents a major opportunity for Togo. Togo can plug its leaking revenues and put a stop to fraudulent activities right now through e-invoicing.