Literature Review

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According to Martin et al (2010), the use of Modern technology and implementation of automatic process is advantageous to both the government and those who are supposed to pay taxes because it helps in reducing tax evasion, promotes better record management and accessibility of information, leads to improved collection of figures and ensures that there is minimal face to face meetings between those in charge of paying taxes and government officials. This finding was also supported by Mugisha (2010) and Chatama (2013) who both agreed to the fact that the use of modern technology in place of manual systems enables the government to obtain true and reliable information thus being able to determine whether taxes are being paid according to the law.

Origin of Value Added Tax

This is a form of levy imposed by the government on sales of goods and services within the country and it is known by different names in different countries for example in Canada and Singapore, it goes by the name goods and services tax. According to Allingham et al (1972) this is a form of indirect levy whereby the individual paying for it is not the one remitting it to the authorities but it remitted to the government by an individual collecting it on behalf of the government.

Value Added Tax was introduced in France in the year 1954, Ivory Coast in 1959, Senegal in 1960, Madagascar 1969, Kenya 1990, South Africa 1991, Uganda 1996, Cameroon 1998, Rwanda 2001, and Tanzania 1998.

According to Keen (2010) Value Added Taxes have been implemented in a number of countries especially those falling under the umbrella of International Monetary Funds (IMF) because this International Institution has made it mandatory and requires that countries collect taxes in order to reduce external borrowing or over depending on donors funds which of late has become unpredictable due to the global economic recessions. According to Joseph L. Rodman (2005) International Monetary Fund (IMF) has put more pressure on the developing and underdeveloped countries on issues of revenue collection in relation to developed countries which they assume have proper systems of tax collection. This is because in most of such countries issues like smuggling makes tax collection far from efficient (Waweru, 2006).

2.3 Electronic Fiscal Devices in Tanzania

EFD is a modern machine developed in order to ensure that the government is not frauded of the revenues that businesses collect on their behalf. EFD has been introduced in Tanzania under the new value added tax, EFD regulations act of 2010 as was gazette by the government under notice number 192 which was published on May 28th 2010 and included in the government finance act 2010 with the law being effective from 1st of October 2010 whereby the government expected that instead of providing consumers with handwritten receipts, the businesses were expected to provide Fiscal Receipts.

Fiscal receipts in this case are those kinds of receipts that have special security features and enable those in authority to check and confirm whether a VAT registered institutions is paying right taxes.

The government of Tanzania had issued with collection of taxes and increased level of corruption where many officials were colluding with business to undervalue their sales thus pay less in form of taxation and because of this they introduced the electronic fiscal devices to replace the electronic cash register which was found to be prone to lots of frauds. EFD was therefore put in place in order to address some of the shortcoming of cash register (source: http://www.tra.go.tz/index.Php/e-fiscal-devices-efd, accessed on 8th November, 2016).

According to Ikasu (2014) Electronic Fiscal Device is a modern machine that was developed in order to promote efficiency in the revenue collection by various governments while sealing the various loopholes which used to exist and prevent government institutions from meeting their targets. According to Nyasha et al (2012) such devices have been developed in such a way that they will capture all transactions made and facilitate calculations of the amount which is due to the government. Nyasha (2012) continues to argue that the use of EFDs, promotes efficiency, reduces administrative expenses and ensures that exact revenue to remitted while at the same time ensuring that delays that used exist are eliminated.

According to Chad and Worlf (1973) many governments throughout the world are trying to come up with proper mechanisms of increasing revenue collection by ensuring that each and every eligible person pays the right amount of revenues. EFD also known as till is an electronic device for calculating, recording and transmitting sales transactions; Automation is the use of different system for operating equipment’s such as machinery, processes, switching in telephone networks while reducing human, involvement which shall ensure that the organization saves on cost of maintaining many employees, reducing energy consumption and materials requirements leading to increased level of accuracy and efficiency (European Journal of business and Management ISSN 222-1905-paper ISSN 2222-2839 online volume 7, No. 33, 2015 accessed on 10th November 2016).

Most governments of the world have come to the realization that despite the huge profits being made by businesses and their ability to collect the amount owed to them in time from their customers, many of them are reluctant to pay the government the amount due in form of value added taxes that they have collected on behalf of the government. This lead to the creation of EFD which was put in place in order to promote efficiency with approximately 33 countries embracing the use of this modern technology and African states have not been left behind in the implementation and use of EFD machines as many of them tries to reduce over dependency on foreign aids which can only be made possible by promoting efficiency internal revenues collection with Tanzania implementing EFD in the year 2010.

2.4 Types of Electronical Fiscal Devices

According to information obtained from Tanzania Revenue Authority website (http://www.tra.go.tz/index.php/-fiscal-devices-efd, accessed on 10th November 2016) there are a number of electronic fiscal devices at the disposal of businesses depending on the types and nature of businesses being undertaken and these include, electronic tax register, electronic fiscal printer, electronic signature devices.

2.4.1 Electronic Signature Device (ESD)

This form of electronic fiscal devices is mostly used by organizations that give receipts and/or invoices through