INTRODUCTION OF ELECTRONIC TAX REGISTERS IN KENYA

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INTRODUCTION OF ELECTRONIC TAX REGISTERS IN
KENYA

• SEMINAR AT
• SAFARI PARK HOTEL
• 1st December 2004
• By SDC, VAT
• Mr. Philip Odeny

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Introduction and Background

• What is Electronic Cash Register - ECR ?
• What is Electronic Tax Register ETR ?
• Other Fiscalised Electronic Devices - FED.
• Why ETR and FED?
• Who should use ETR and FED ?
• Selection of ETR and FED.
• Selection of Suppliers.
• Role of Suppliers.
• Role of Software Houses.
• Implementation Plan.

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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.

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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.

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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.

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SAMPLE TYPES OF DEVICES
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Electronic Tax Registers

• There is a whole range of ECRs for fiscal and
  non fiscal purposes. The difference is presence
  of FISCAL MEMORY UNIT.

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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.
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COMPUTER SYSTEMS AND ESD
ELECTRONIC SIGNATURE DEVICE
Request
PC
Signature
SIGNED Invoices, Receipts Etc.
PRINTER
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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
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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.

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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.

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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.

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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.

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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

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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.

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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

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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.