INTRODUCTION OF ELECTRONIC TAX REGISTERS IN KENYA SEMINAR AT SAFARI PARK HOTEL 1st December 2004 By SDC, VAT Mr. Philip Odeny Introduction and Background 1. What is Electronic Cash Register - ECR ? 2. What is Electronic Tax Register – ETR ? 3. Other Fiscalised Electronic Devices - FED. 4. Why ETR and FED? 5. Who should use ETR and FED ? 6. Selection of ETR and FED. 7. Selection of Suppliers. 8. Role of Suppliers. 9. Role of Software Houses. 10. Implementation Plan. What is Electronic Cash Register - ECR ? • Electronic Cash Register is a device used by traders to record sales and issue receipts. • It also stores information such as sales, stocks, and can also issue reports e.g. daily sales. • Electronic Cash Registers have been in use by taxpayers for long. What is Electronic Tax Register – ETR ? • Electronic Tax Register (ETR) is a Cash Register but with Fiscal Memory. • Fiscal Memory is a special Read Only Memory built into the cash register to store tax information at the time of sale. • ETR can be used as stand alone or configured into a network. • ETR has special security features e.g. seal, memory, serial no., special technical specifications etc. Other Fiscalised Electronic Devices - FED Fiscalised Printers: • This are high Speed Fiscal Printer connected in a computer network to store every sales transaction in its Fiscal Memory while it issues receipts to taxpayers. Electronic Signature Devices: • ESD is used in conjunction with the accounting system • For a document to be valid it must bear the electronic signature • ESD applies to computer based, printed tax documents issued to a third party • The text of the invoice passes through the ESD and is saved • ESD performs an algorithm over all signatures Issues a HASH e.g. SHA-1 algorithm to make every transaction virtually unchangeable. • Retail fiscal units in the realm of business to business transactions may use ESD for invoices, transport documents etc. Electronic Tax Registers • There is a whole range of ECRs for fiscal and non fiscal purposes. The difference is presence of FISCAL MEMORY UNIT. Other Devices Hi Speed Fiscal Printer: Has two RS232 ports for PC online operation and barcode POS Compact Modular System: Aimed at the software developer who wants to sell a customized POS solution or at the retail equipment dealer who wants a turn-key POS solution with advanced software. Embedded-PC model is built using the CPU and comes in a very small shape, contains the AC power supply and hard disk. COMPUTER SYSTEMS AND ESD Request Signature “SIGNED” Invoices, Receipts Etc. Other Devices Telecom: Ethernet and Internet / email enabled cash registers are low cost, stand alone ETRs. Electronic Signature Device: ESD has many shapes and its functions have been previously discussed Why ETR and FED? ETR: • Ordinary ECR is prone to falsification. • Has a Tax memory that carries information on tax. • Tax memory is a programmable read only memory (EPROM or PROM). • The tax memory capacity should store data for at least 5 years or 1800 day transactions. • Issue fiscal receipts which are easily identifiable for inspection purposes & daily fiscal summary report. Who should use ETR and FED ? • KRA intends to enforce the use of ETR and FED on EVERY taxpayer. • Selection of the device to use depends on the needs of the business. • ETR will mainly be used by small scale retailers. • ESD and printers are to be used by computerised traders. Selection of ETR and FED. • There exist various types of ETRs each with its functions. • This depends on the needs of a trader and each model/machine will be vetted according to the stipulations of the law. Selection of Suppliers • This exercise involves advertisement through press • Submission of request to supply by the suppliers. • Inspection of requests and brochures by the technical committee with respect to criterion defined in the ETR Regulation. • Pre-qualification of suppliers who meet requirements. • Request of sample machines for inspection by technical committee. • Approval process by technical committee results in appointment of suppliers who meet ALL requirements set forth. • Among salient features the selection committee shall verify are financial standing, technical background, experience in similar undertaking and branch network of the supplier. Role of Supplier • To work with KRA to ensure that the models they supply fulfill the requirements of the ACT. • Ensure continuity of the model by maintaining ceaseless backups. • Work with KRA to improve the system through innovation. • Work with KRA to identify offenders. • Detailed identification of the manufacturer or importer; Software Houses • The software developer who wants to sell a customized POS solution in form of Drivers or at the retail equipment software shall be essentially “pointing” or “re-aligning” or “to talk” to the POS systems to save copies of all transaction into fiscal memory. • The software shall ensure re-use of some existing POS using ESD or added Fiscal Modules that shall be guided in operations using software drivers created or sourced by Software Houses. • Innovation of new technologies. ADVANTAGES • More jobs for technicians • More jobs for the software houses • Better control and management of business by traders • Shorter audit periods by taxman • Less paper work Implementation Plan • This is a long term project where more emphasis should be placed on correct implementation in addition to time limits. • KRA is to lead the whole process and has to keep taxpayers informed of the steps to follow. • Implementation plan is being worked and will be publicised.