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How to make VAT collection effective

The Chairman of Federal Inland Revenue Service (FIRS), Babatunde Fowler, has said that the use of technology is pivotal to the effective monitoring of Value Added Tax (VAT) collection in Africa.

Fowler said this at the African Tax Administration Forum (ATAF) technical workshop on VAT in Abuja.

According to the tax administrator, many Africans now utilise various online platforms as their preferred means of shopping.

He, therefore, urged African tax revenue agencies to begin to understand the digital system, adopt technology and begin to map out plans for the collection of VAT for online transactions.

He also called on African tax revenue agencies to synergise their manual and digital operations to facilitate the collection of VAT on cross-border digital trade.

“We need to closely look at the taxation of digital goods and services. Increasingly, consumers are looking for products, services and goods online.

“This forms part of the fourth Industrial Revolution, where our civilisation is moving towards digital platforms as a means of facilitating the day-to-day running of businesses and households.

“It is imperative to understand how this will affect VAT as a tax and how best to mitigate any challenges,” he said.

He added that VAT systems are hinged on tax policy, administration and the law. Hence, the need for coordination.

“VAT systems, which have not been adapted to technology do not provide for adequate levying and collection of VAT on cross-border digital trade,” he explained.

Fowler also stated that double taxation and unintended non-taxation are the biggest risks to efficient and effective VAT collection and called for effective collection of the rates.

He also urged tax authorities in Africa to be forthright in the collection of tax, adding that it would help provide useful data to aid tax audits.

“We must promise increased transparency between multinationals and the tax authorities. The VAT systems, if streamlined, should then have a ripple effect in attaining useful data to guide effective tax audits in other areas,” Fowler said.

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