East African nations urged to embrace digital VAT solutions

KAMPALA— East African Community member states should adopt digital solutions to improve Value Added Tax (VAT) collection and compliance, according to experts at a recent regional seminar.

VAT remains a crucial revenue source for most African economies but faces challenges including compliance gaps and administrative inefficiencies.

Dr. Kennedy K. Mbekeani, director general for the Southern Africa region at the African Development Bank (AfDB), emphasized the need for regional governments to invest in digital technologies and train tax authorities. He said such modernization is critical for boosting taxpayer compliance and domestic revenue mobilization.

Mbekeani made his remarks during a seminar in Nairobi, also held virtually, under the theme “Driving Smarter VAT Compliance.” The event addressed persistent VAT compliance challenges across East Africa and the broader African continent, showcasing innovations like e-invoicing, e-filing and automated audits.

Case studies from countries including Kenya, Uganda and Tanzania highlighted legislative and technological advancements in e-Tax compliance. The AfDB reaffirmed its support for tax reforms and promoted public-private partnerships in the digital tax space. Kenya, Senegal and South Africa were recognized as pioneering African countries in adopting e-Tax systems.

George Obell, Commissioner for Micro and Small Taxpayers at the Kenya Revenue Authority (KRA), stated that VAT is central to digital reform efforts aimed at improving administrative efficiency and expanding the tax net. KRA has implemented tools such as e-filing, e-invoicing and data-driven VAT collection systems.

Uganda’s approach was presented by Festo Kasirye, a tax officer at the Uganda Revenue Authority (URA). He reported that the adoption of data-driven systems has increased Uganda’s VAT collections by nearly 50%.

URA rolled out the Electronic Fiscal Receipting and Invoicing System (EFRIS) in January 2022. The system mandates electronic invoicing through Electronic Fiscal Devices (EFDs) to improve transaction transparency. Kasirye noted that EFRIS, based on business-to-business invoicing, has minimized under-declaration of sales by tracking transactions in real time, despite initial resistance from some businesses.

Uganda’s VAT regime, governed by the Value Added Tax Act Cap. 349, charges a standard rate of 18%. Recent amendments require non-resident digital service providers with an annual taxable turnover exceeding 150 million shillings ($40,000) to register for VAT in Uganda. Registered entities must file quarterly VAT returns by the 15th day after each quarter’s end.

Emeka Nwanko, head of member services at the African Tax Administration Forum (ATAF), highlighted empirical evidence showing digitalization’s positive impact on revenue mobilization across Africa. He stressed the importance of aligning government systems and taxpayer practices with the digital economy’s realities.

“Africa’s business environment is evolving rapidly, and that creates new challenges for tax compliance,” Nwanko said, pointing to the growing complexity of tracking transactions in e-commerce and digital marketplaces. ATAF studies show VAT contributes an average of 30% of total tax revenue in Africa.

ATAF has provided technical support to URA, particularly in policy development, legislation and administrative structures to improve VAT compliance in the digital age.