Tax experts and policy makers have called on East African countries to fully embrace digital systems in the collection of Value Added Tax (VAT) to improve compliance, close revenue gaps, and boost the income generated by governments across the region.
The appeal was made during a seminar held in Nairobi, Kenya, with the theme “Driving Smarter VAT Compliance”. The event brought together tax administrators, government officials, private sector stakeholders, and digital experts from various African countries. They discussed the challenges facing VAT compliance and shared ideas on how digital tools can make tax systems more efficient and inclusive.
Dr. Kennedy K. Mbekeani, Director General for the Southern Africa Region at the African Development Bank (AfDB), was one of the key speakers at the event. He said VAT remains one of the most important sources of income for many African governments, but collection is often affected by weak digital infrastructure, low compliance levels, and poor administrative systems.
Dr. Mbekeani stated that the way forward is for tax authorities to modernise their operations, invest in digital VAT solutions, and train their workers on how to manage digital tax platforms. According to him, such changes will help ensure that more businesses comply with tax regulations and the government can collect more revenue without relying on old and slow systems.
Other speakers at the event pointed to success stories in countries like Kenya, Uganda, and Tanzania, where digital VAT tools such as e-filing, electronic invoicing (e-invoicing), and automated tax audits have improved the collection of taxes and reduced fraudulent practices.
In Kenya, the Kenya Revenue Authority (KRA) is already using technology to simplify VAT processes. George Obell, the Commissioner for Micro and Small Taxpayers at KRA, said the authority has adopted digital tools to make it easier for businesses to comply with tax laws. He said e-invoicing and e-filing have made the system more transparent and helped reduce under-reporting of income by businesses.
In Uganda, the Uganda Revenue Authority (URA) introduced a system called Electronic Fiscal Receipting and Invoicing System (EFRIS) in 2022. This system forces VAT-registered businesses to use certified devices to issue e-invoices for all transactions. Mr. Festo Kasirye, a tax officer at URA, said the introduction of EFRIS has improved VAT collections by nearly 50 percent. He explained that while some businesses initially resisted the system, many have now accepted it because it helps to properly track sales and determine the correct taxes to be paid.
Mr. Kasirye said the digital platform has exposed businesses that were under-declaring their sales or avoiding taxes. With EFRIS, all transactions are now being recorded electronically, making it harder for businesses to cheat the system.
The seminar also discussed how East African countries are adjusting their VAT systems to target the digital economy, especially big international companies offering services online. In Uganda, the VAT Act was recently updated to ensure that non-resident companies like Netflix, Facebook, and Google register for VAT if their annual sales in Uganda exceed UGX 150 million. These companies are also expected to submit VAT returns every quarter, even if they do not make sales in that period.
Mr. Emeka Nwanko, Head of Member Services at the Africa Tax Administration Forum (ATAF), said the rapid growth of online businesses in Africa has created new challenges for tax administrators. He explained that because many digital companies do not have physical offices or stores in African countries, it is difficult to monitor their sales and collect taxes. He said VAT is a consumption tax that should be charged when goods or services are supplied, but with online sales, many transactions go unrecorded or under-reported.
According to Mr. Nwanko, VAT contributes up to 30 percent of total tax revenue in many African countries. He stressed the importance of using digital tools to improve transparency, block revenue leaks, and expand the tax net.
A recent report by ATAF showed that while e-commerce has created jobs and business opportunities, it has also made VAT collection more difficult due to poor visibility of digital transactions. The report recommended stronger laws, better technology, and closer collaboration between governments and businesses to improve tax compliance in the digital age.
The seminar ended with a call for stronger public-private partnerships, continuous training of tax officers, and more regional cooperation to support tax digitalisation efforts across East Africa. The African Development Bank pledged to continue supporting these reforms, with a focus on helping countries to modernise tax systems and increase their revenue without placing unnecessary burdens on businesses
