How VAT laws hinder compliance, by PwC

TAX experts, PricewaterhouseCooper (PwC) has identified multiplicity of Value Added Tax (VAT) systems across Africa as a major factor responsible fortax risk, errors and inconsistencies in the application of the law.Most of Africa's 54 countries, according to PwC, had VAT systems in place which foreign investors and businesses could not afford to be ignorant about.Inareport titledan Overview of VAT, 2011, PwC recentlyquoted Mr.Taiwo Oyedele, tax partner, PwC Nigeria, as saying: 'A potentially lucrative deal in Africa can easily turn sour if the parties do not take into account the potential liability for VAT registration or the basic structure of VAT in the relevant country.'Thefourth edition of 'Overview of VAT in Africa'was compiled by PwC VAT specialists in the following African countries: Botswana, Cameroon, Cape 'Verde, Chad, Congo andCte d'Ivoire.Othersare Equatorial, Guinea, Gabon, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Rwanda, Senegal, South Africa, Tanzania, Tunisia, Uganda, Zambia and Zimbabwe.The guide, which is based on the law in effect as at July 31, 2011, outlines the VAT principles, regarding VAT rates, the registration of VAT, output tax, exemptions, zero-rating, input tax, international trade, VAT accounting, record keeping, as well as the basic principles relating to other indirect taxes in each of these countries.Oyedeleexplained that out of that, many multinational companies encounter two major hurdles when entering into transactions in Africa.According to PwC, the VAT laws tend to be complex in most countries, adding that they had to deal with different rules across a multiplicity of jurisdictions.He said: 'The VAT systems in Africa are not aligned, which has a major effect on a company's operating and financial systems.'Heexplained that the tax authorities expected compliance with the laws in their respective jurisdictions, pointing out: 'As a result the compliance burden on companies may be onerous.'He explained that compliance with the VAT laws was more difficult for multinational companies due to the diversity of laws in different tax administrations.Furthermore, the tax expert added thatmany companies were unable to claim VAT refunds as a result of unsophisticated tax systems and changes in legislation, and unreasonable deadlines for submitting claims.
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