CHAPTER 2 LITERATURE REVIEW
2.4 Empirical Studies on EFD Use and Voluntary Compliance
2.4.2 Factors for Electronic Fiscal Devices Adoption and Use in Taxation
how it impacts the perception of the effectiveness of auditing, fairness in taxation procedures, and the level of transparency in audit processes. These factors are theoretically important is determining tax compliance; however, their relationship with EFD use is not explored despite the relevance (Murphy, 2008; Gurama, Mansor, & Pantamee, 2015).
The picture was taken 14 February 2014, in a negotiation between taxpayers and the government. The meeting was presided over by the Prime Minister of Tanzania, Hon. Pinda.
Figure 2-6: Prime Minister of Tanzania holding negotiation meeting with leaders of taxpayers.
Source: (Tanzania Revenue Authority, 2014)
2.4.2.1 Demographic factors
Gender, age, level of education and experience in business are thought to be strong factors for determining user behaviour concerning technology use in business. These factors are important because they are human factors (Lubua & Pretorius, 2018). Therefore, the awareness of these factors enables the organisation to understand how to enhance new changes in technology, especially where the interest lies in the initiator.
i.) Age
With regard to age, technology users are either young, middle aged or senior members of the society. Studies agree that the age category of citizens may define the ability of a person to adopt the technology (derKaay & Young, 2012). Generally, it is believed that young people quickly adopt the technology. They are quicker learners than seniors. One reason for this situation is that young people are less occupied with many things, and are adventurous (Olson, O‟Brien, Rogers, & Charness, 2011). On the other hand, elderly people are preoccupied with many things such as families and other social life. Therefore, they are likely to be resistant to change. On the other hand, although young people are pro- technology, they will quickly adopt the technology linked to their social lives and make them important to the society, or among their peers. In this regard, although they quickly learn, they can change and become resistant to the technology, which may require them to pay taxes (Charness & Boot, 2009).
Furthermore, the study by DerKaay and Young (2012) suggested that physical and physiological factors challenge older people in adopting new technologies. These reasons are also supported by Charness and Boot (2009) who said that most people lose the strength of their vision with age. Good vision is important for the use of Electronic Fiscal Devices, otherwise the probability of making errors is high (Hofmann, Voracek, Bock, &
Kirchler, 2017). Moreover, some older people regard the adoption of Electronic Fiscal Devices or any other related technology as a stressful process because of the requirement for them to learn how to use it (Vaportzis, Clausen, & Gow, 2017). This can be a setback to older people who are still active in business.
ii.) Gender
Another demographic factor influencing the use of EFDs is gender. Although the literature on the use of Electronic Fiscal Devices by different gender groups is limited, the desire to be tax compliant could be a moderating factor. For example, in tax affairs, females are more inclined toward compliance than men (Chung & Trivedi, 2003; Hofmann, Voracek, Bock, & Kirchler, 2017). Within the category of small taxpayers, females are in the majority across the world, therefore, the adoption may equally be favoured by their peer pressure (Antwi, Inusah, Mohammed, & Hamza, 2015). The rate of using Electronic Fiscal Devices may be higher in the African context, because of the natural instinct of women to obey the law and higher authorities (Hofmann, Voracek, Bock, & Kirchler, 2017).
iii.) Education
The level of education is another demographic factor thought to influence the use of Electronic Fiscal Devices. For example, Kira (2016) suggested a direct correlation between the level of education of users and the rate of use. Educated personnel adopt quicker than uneducated ones (Riddell & Song, 2012). This is possibly because educated personnel possess basic analytical knowledge, which helps them to adapt to the changes in technology. Moreover, formal education increases the willingness of taxpayers to comply once they understand the benefits (Newman & Nokhu, 2018).
While education is a good ingredient for the development of people and society, it is unfortunate that there are times when people abuse it. The knowledge possessed by a person (or taxpayers in current settings) could be used dishonestly to facilitate tax avoidance. Tax avoidance is used to minimise tax liability and sanctions resulting from the
tax assessed (Fierre-Seren & Panades, 2013; Ramharak, 2014). Overall, since a large proportion of small business owners in Tanzania have a low level of education, the challenge of avoidance through manipulation is likely to be low; instead other challenges associated with the low knowledge need to be addressed. Such challenges may include running from tax officers, and boycotting taxation without relevant bases (Lubua E. , 2014;
Setyorini, 2016).
iv.) Business experience
Business experience is another variable thought to influence the use of EFDs in Tanzania among small business owners (Kapera, 2017). Business experience equips the business owner with skills and knowledge necessary for daily business operation. With experience, the business owner can foresee the future provided that other factors hold steady. In the case where the experience favours the adoption and use of technology, the process becomes easy (Chen, Rong, Ma, Qu, & Xiong, 2017). With the introduction of Electronic Fiscal Devices, it is unfortunate that some business owners feel that the future is no longer predictable. This is possibly due to naivety; in this regard awareness creation programmes are necessary for the effective adoption and use of Electronic Fiscal Devices (Bucciarelli, Odoardi, & Muratore, 2010; Chen, Harold, Little, Mark, & Zhao, 2012). The current study is convinced that the new experience, built through the use of Electronic Fiscal Devices, will set the foundation for the future.
2.4.2.2 Benefits of Electronic Fiscal Devices
When talking about EFDs, it is important to consider two perspectives: the government and taxpayers (Edogbanya & Sule, 2013; Deyganto, 2018). This has to be a win-win situation.
There must be a clear and easy way of identifying the benefits of EFDs, which will influence eligible users to adopt the technology willingly. The study by Chau and Leung (2009), and that of Lubua and Pretorius (2019) suggested that where the benefits are clear, users adopt the technology with minimum effort from service providers. This cannot be different from assertions by models such as the Unified Theory of Acceptance and Use of Technology and the Technology Acceptance Model, which suggested that benefits (the usefulness) of the technology are a driving force toward their adoption.
The first benefit of the Electronic Fiscal Device is that it has an inbuilt memory, which cannot be erased by mechanic activities, chemical or even the use of electromagnetic
techniques (Tanzania Revenue Authority, 2018). This is partly a benefit for both the government and the user. The government is certain about the integrity of data after submission, while the business is also benefiting. Largely, Electronic Fiscal Devices provide a good point of reference for tax audit because of the assured integrity of submitted data (Mandari, Koloseni, & Nguridada, 2017). Because of the ability to keep records with the required level of integrity, it avoids unnecessary conflict between taxpayers and the revenue authority, tax audit or assessment (Chege, Kiragu, Lagat, &
Muthoni, 2015). This is because both have the same point of reference. Should an objection be filed, the same reference is used, therefore it eliminates unnecessary debate between the two stakeholders (Mandari, Koloseni, & Nguridada, 2017; Murangwa, 2018).
On the other hand, the Electronic Fiscal Device is beneficial to traders when used to issue receipts because of the longevity in retaining power, even after it is disconnected (Murangwa, 2018). It can hold power for 48 hours without recharging. Practically, if traders were to use computers and printers, these devices would be more expensive, and would require a contingency plan should a power shortage occur (Badhel & Chole, 2014).
Other technical benefits include the ability to save data to the memory for five consecutive years, and automatically store the memory without user efforts (Tanzania Revenue Authority, 2019). In one way or another, these aspects are of benefit to the user and the revenue authority in creating a common ground for tax assessment. The final benefit of the Electronic Fiscal Device is its ability to submit data automatically (Kapera, 2017; Tanzania Revenue Authority, 2018).
2.2.2.3The Accessibility and Maintainability of Electronic Fiscal Devices
Accessibility to information is a critical factor in any information system and associated software modules (Al-Khulaifi, 2012). This is the reason why in the Information Systems auditing profession, this is one of the pillars for business continuity (Cascio &
Montealegre, 2016). For business operations to continue there should be an assurance that the information will be readily available to all key stakeholders. Moreover, the relevance of the information considers things such as roles and responsibilities; access is granted based on someone‟s role and responsibility (Patel, 2007). Accessibility is one element that Electronic Fiscal Devices guarantees to users (Tanzania Revenue Authority, 2019).
Taxpayers and the revenue authority will be able to access the information from the system independently. Unfortunately, although the traded information is guaranteed even after the
failure of the Electronic Fiscal Device, it is important to acknowledge that the high frequency of failure is affecting users (Mandari, Koloseni, & Nguridada, 2017; Eilu, 2018).
This is the area which requires the attention of the revenue authority in sustaining the use of these devices.
In addition, the study by Aumeerun, Jugurnath and Soondrum (2016) suggests that the system, which is easy to maintain after a fault, will survive. In a system, some faults are inherent while others are caused by human interactions. Regardless of the cause of the fault, it is mandatory that the system should be fixed for sustainability. The study by Faizal and Palil (2015) suggested that the inability of taxpayers to fix EFD faults themselves, paralyses operations. One reason for their failure is that all instructions are in English, whereas users are conversant with the Swahili language for following instructions.
Moreover, the low technical ability of users is another problem. Mukhlis, Utomo and Soesetio (2015) commented that even vendors, who are expected to service such devices, sometimes delay delivering such services to clients. Overall, the review in this section reveals that difficulties in maintaining Electronic Fiscal Devices affects their use.