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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

Introduction and Background


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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.

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.

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.

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.

Electronic Tax Registers


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

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.

COMPUTER SYSTEMS AND ESD

Request

Signature

SIGNED
Invoices,
Receipts Etc.

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

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.

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.

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.

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.

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;

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.

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

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.