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INTRODUCTION OF
ELECTRONIC TAX REGISTERS
IN KENYA


TAXPAYER SEMINAR AT KICC - NAIROBI

20
th
J ANUARY 2005




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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.

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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.




Hi Speed Fiscal Printer:
Has two RS232 ports for PC
online operation and barcode
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Electronic Signature Devices -ESD:

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 Signature Device:
ESD has many shapes and its functions
have been previously discussed
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COMPUTER SYSTEMS AND ESD

SPECIAL SECURE FISCAL DEVICE FOR RECORD SIGNING
(SSFDRS) WITH SECURE HASH ALGORITHM (SHA-1)
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COMPUTER SYSTEMS AND ESD

SIGNED
Invoices,
Receipts Etc.
Signature
Request
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Other Devices

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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Other Devices
Telecom:

Ethernet and Internet / email
enabled cash registers are low cost,
stand alone ETRs.

This device may be used by traders
with a direct connection to KRA
Server to upload their periodical
transactions.
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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.
Selection 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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ROLE OF KRA STAFF
Enforcing issuance of fiscal receipts
Educating public
Identification and Prosecution of
perpetrators
Auditing and inspecting functionalities of
fiscalised devices
Suggesting potential improvements

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ADVANTAGES OF
FISCALISATION

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 by trader
More VAT revenue

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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 will be publicised.


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Extra requirements by Kenya
The ETR stores reconnection reports each time the Fiscal
Memory may be disconnected either for service or maliciously.
Such is evidence in the court of law. The reconnection reports
shall include time/date stamp of the event,
The ETR dates are rendered irreversible. This ensures integrity
of records so that no room for backdating shall exist,
The ETRs shall enforce Password Controls during servicing.
The delegation proposed a user password length of six or more
characters, supervisor password length of sixteen or more
characters both of which must enforce character and digits
combination as well as password expiry,
The ETR shall kick out a service man after 3 failed login
attempts. This is a measure to frustrate hackers
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END

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