Impact of Electronic Billing Machine (EBM) on Vat Compliance among Small and Medium Sized -Enterprises in Rwanda

Review Article

Austin J Bus Adm Manage. 2020; 4(2): 1046.

Impact of Electronic Billing Machine (EBM) on Vat Compliance among Small and Medium Sized -Enterprises in Rwanda

Harelimana JB*, G Patrick, Sanyu A and Rutungwa E

Institut d’Enseignement Superieur de Ruhengeri Musanze, Rwanda, Musanze, Rwanda

*Corresponding author: Jean Bosco Harelimana, Institut d’Enseignement Superieur de Ruhengeri Musanze, Rwanda, Musanze, Rwanda

Received: January 27, 2020; Accepted: February 21, 2020; Published: February 28, 2020


This study aimed at assessing the impact of Electronic billing machine on VAT compliance on Small and Medium Size -Enterprises in Rwanda. The main challenge in the administration of Value Added Tax (VAT) in many countries, has mainly been tax evasion by non-issuance of tax invoices especially by small to medium taxpayers. Electronic Billing Machines (EBMs) enable revenue authorities to monitor formal business transactions and thus offer the potential to improve VAT compliance, however, because firms can choose not to issue receipts or issue false receipts, EBMs have limited benefits to VAT collections.

Descriptive method was used to collect data, data gathered was analyzed, interpreted and presented. A sample size of 159 people grouped into Medium taxpayers, Small taxpayers and staff of RRA Musanze station was randomly selected from a population of 709 VAT registered taxpayers located in Tax centre of Musanze. Primary and secondary data was used in this research.

Given the findings of this study, there is positive relationship between the adoption of mandatory usage of EBMs and VAT compliance indicators with a correlation coefficient of 0.586. It was established that after the adoption of EBMs, late filing and non-filing rate of VAT has reduced by 14% and 20% respectively, timely payment of VAT liabilities has increased by 20%, reporting of sales has increased by 737%, VAT collections were increased by 732% and voluntary VAT registration has increased by 346%.

To improve VAT compliance through EBMs. RRA is recommended to come up with plan integrating EBMs within broader tax compliance frame works that create the environment which will best ensure taxpayers’ voluntarily compliance.

Keywords: Electronic Billing Machine (EBM); VAT Compliance; Small and medium size enterprises


Generally, the rationale for imposing taxes in any country is derived from the government responsibilities of providing social and economic goods and services such as public goods, redistribution of income and wealth, social and economic welfare, and economic stability.

The primary mission of the tax administration is to collect the tax revenues due and needed by the government, under the country’s tax laws, without hindering economic activity. In pursuing their mission, tax administrations face a number of challenges, including how to broaden the tax base by continually bringing non-registrants and non-filers into compliance, strengthening organization and management, controlling tax evasion, improving tax collection, and facilitating voluntary compliance. The greatest challenge for any tax administration is achieving and maintaining a high degree of voluntary compliance.

Improving VAT compliance is one of the most critical issues for domestic revenue mobilization in developing countries for two reasons: Firstly, VAT revenues tend to dwarf all other tax revenue streams, so that even small improvements have relatively large impacts. Secondly, the data generated to observe VAT liability generates a paper-trail that strengthens a revenue authority’s ability to enforce tax compliance across all domestic tax types [1].

Many governments around the world have recently introduced Electronic Billing Machine (EBM). These devices aim to combat non-compliance with VAT by monitoring business transactions [1]. A good tax collection system is based on the recording of all transactions that are subject to taxation, sometimes via the use of electronic devices that would prevent eluding the State’s interests and committing fiscal fraud.

In the context of worldwide the first to use Electronic Fiscal Device (EFD) was the Italian administration in 1983. The Greek tax agency was the next tax administration to adopt fiscal devices in 1988 Kenya was the first adopter in Sub-Saharan Africa in 2005, and since then many others have followed including Tanzania, Ethiopia and most recently Rwanda and Malawi. South Korea has extended the scope of EFDs to all business. EFDs have therefore been an important and influential policy [1]. The Table 1 presents an overview of the roll-out of EFDs for a selection of countries: