EXCISE TAXATION: USING TECHNOLOGY TO MITIGATE CHALLENGES OF TAX EVASION AND DIVERSION OF EXPORT PRODUCTS

Zambia Revenue Authority

1. Zambia Revenue Authority EXCISE TAXATION: USING TECHNOLOGY TO MITIGATE CHALLENGES OF TAX EVASION AND DIVERSION OF EXPORT PRODUCTS 1

2. Zambia Revenue Authority Excisable products Excise Tax – Collection Points Excise Process Risks/Challenges Using Technology to mitigate the challenges Conclusion 2 CONTENTS

3. The following are the excisable products: Clear beer Opaque beer ( High Risk ) Hydrocarbons Spirits ( High Risk ) Wines Airtime ( High Risk ) Cosmetics Electricity Cigarettes ( High Risk ) Undenatured Ethyl Alcohol ( High risk ) Motor Vehicles Zambia Revenue Authority EXCISABLE PRODUCTS 3

4. Zambia Revenue Authority Excise Tax – Collection Points 4 Production Stage Sales Stage Production Inputs Stage Excise Tax

5. Zambia Revenue Authority The Excise transactions are all automated processes from registration to payment. The Excise manufacturers and service providers are given access to ASYCUDAWorld. Declarations are electronically done Attachments of returns; Documentary examination, e-queries; Surveying and assessments E-payments and interest surcharge 5 Excise Process

6. Zambia Revenue Authority Exports are electronically processed Non Intrusive Scanners – timely and convenient Automation of exit gates Use of Personal Digital Assistant (PDAs ) CCTV 6 Export Process

7. For Opaque beer, evasion occurs at production Under declaration of production and sales, At production, under declaration of inputs (raw materials) because of smuggled inputs For Telecoms industry (Airtime), evasion occurs through several means including complex accounting techniques and through promotions Voice , sms , data, mms, and video (complexity of billing system) For unlicensed Traders of alcohol inputs such as Undenatured Ethyl Alcohol, the tax rate is 125%. Most traders seek ways to smuggle these inputs. For hydrocarbons and other products, diversion of exports (Transit fraud) is the challenge. Manufacturers who manufacture non excisable products could start manufacturing excisable products and not declare them CIPs on Motor Vehicles Zambia Revenue Authority Risks/Challenges 7

8. Electronic Transit Cargo Tracking Systems Use of Business Intelligence Systems Post Computer Audits Central Processing Centres (CPCs) Zambia Revenue Authority Using Technology to mitigate the challenges 8

9. Zambia Revenue Authority MOU signed with COMESA; 9 Electronic Transit Cargo Tracking System

10. Zambia Revenue Authority Electronic Transit Cargo Tracking System – Export Diversion (Transit fraud) 10

11. Zambia Revenue Authority Knowledge engineering & Knowledge discovery Transfer view (human knowledge – artificial Intelligent system) Modelling view ( model knowledge & problem solving techniques of expert domain into AI system) Modelling view involves DATA MINING Data Mining Involves finding relevant information from large volumes of data by applying appropriate statistical rules (association rules) The modelling view involving data mining is recommended 11 Use of Business Intelligence Systems

12. Zambia Revenue Authority 12 Modelling view involving Data Mining - techniques for data acquisition, analysis, discovery & visualization Telecoms Companies Other Revenue Authorities Brewery Companies Power Utility Companies ZRA Internal Systems BI Environment

13. Zambia Revenue Authority The CPCs will offer document examination and assessment of declarations submitted to Customs on a 24 hours basis, Offer enhanced efficiency in customs clearance services and reduce the cost of doing business to the community, Provision of uniform and consistent service Consistency in application of the customs and excise act at all borders. 13 Centralised Processing Centres

14. 14 Zambia Revenue Authority AGENT/TAXPAYER CUSTOMS INSPECTOR EXAMINING OFFICER CENTRALISED PROCESSING CENTRE REMOTE ZRA BORDER REMOTE DTI OFFICE Centralised Processing Centres 1. TAXPAYER OR AGENT FRAMES ENTRY ONTO ASYCUDAWORLD 3. CPC SENDS ENTRY TO STATION FOR INSPECTION DATA CENTER AT ZRA HQ 4. QUERY OFFICER VALIDATES QUERY AND SENDS TO AGENT 2. ENTRY IS SENT TO CPC FOR PROCESSING 5 . AGENT ANSWERS QUERY AND SENDS TO CPC

15. Zambia Revenue Authority 15 Post Computer Audits Given the highly automated taxpayers and huge volumes of data, audits are made easier by the use of the ICT tools such as Oracle Discoverer; Audit Command Language (ACL) for data analysis

16. Zambia Revenue Authority Tax evasion affecting Excise could be managed using effective monitoring techniques: a t production s ales and i nput levels Using appropriate data mining techniques, it is possible to trace patterns that result in revenue leakage through cheating. 16 Conclusion

17. THE END Zambia Revenue Authority 17