E-tax in Kinondoni

Kinondoni Council published a statement a couple of weeks ago claiming some remarkable gains in their tax revenue, resulting from their adoption of electronic means of tax collection.

They’ve set up two new ways for people to submit their tax, rather than queuing for a long time at the bank and/or the council offices. People can use one of the 171 Max-Malipo agents in Kinondoni or can pay using mobile money – either Voda’s M-Pesa service or Tigo Pesa.

But what’s most interesting about this is the claims the council makes about the impact of these changes on their tax revenues. I’ve turned two of these claims into a simple chart:

Details are scant, so it’s hard to interrogate these figures properly. But the numbers are impressive: a 44% increase in council revenue from cost sharing in public health services, and a 169% increase in building tax revenue.

(Incidentally, the council reported the figures in the chart above and gave the percentage increases wrongly as 69% and 269%, so the numbers may not be reliable.)

Multiplying it up, and assuming these figures are roughly correct, Kinondoni Municipal Council is looking at an additional annual revenue of something like 1.5bn/-, or $1m – and that’s only taking into account two relatively minor revenue streams. Despite the uncertainty, these figures look significant.

The council also claimed an 18% increase in City Service Levy and a 20% increase in Market Tax, though they didn’t give specific figures.

I hope somebody is looking at them with more precision, and looking at whether other councils could make similar gains by adopting a similar approach.

It would also be interesting to know why switching to an e-payment system has increased revenue. Is it that it’s just that much easier for the taxpayer, who has to spend much less time standing in queues waiting to pay? Is it that it’s more efficient for the council, freeing them up to chase non-payers? Or it is that it has shut down an opportunity for somebody somewhere to pocket what should have been going to the council?

And finally, although this data has nothing to do with VAT, (which is collected by the Tanzania Revenue Authority (TRA) rather than councils), it might still have relevance to the debate on Electronic Fiscal Devices (EFDs) for sales receipts. TRA is insisting that traders – even those not previously registered for VAT – should use Electronic Fiscal Devices (EFDs) to issue receipts, which immediately transmit data to TRA on the sale.

The introduction of these devices has prompted widespread complaints and strikes by traders – the suspicion being that it’s now much harder for them to evade the taxman and that this is costing them dear.

Which leaves me with a question: does anyone have good data on how the introduction of EFDs has affected the amount of VAT collected by TRA?