Egyptian Tax Authority improves tax compliance using Microsoft SQL Server

Seeking a better way to realize tax compliance

Paying taxes is a requirement for individuals and businesses in nearly every community in the world, yet some people avoid giving their share. Previously, taxpayers in Egypt were responsible for reporting complete tax data. However, a long-standing shadow economy in Egypt was costing significant tax revenues and required a solution: a system that could better control the scope of economic activity and eliminate shell companies.

In Egypt, taxes are the most important source of the state‘s public budget. They help provide the funds required for infrastructure throughout the country, including healthcare, education, public services, and transportation systems.

Engineer Yasser Taymour, Advisor to the Minister of Finance for the Egyptian Tax Authority (ETA) Reform, says, “As part of investigating a way to better achieve tax compliance, we considered successful solutions implemented by countries with comparable economies, tax communities, and requirements. These explorations helped us produce a solution to help Egypt enhance its economic status.”

Generating more revenue with an e-invoicing and e-receipt solution

Egyptian taxpayers previously attached the required information from their e-invoices and e-receipts to paper tax forms. It became clear that a better solution could be the instant exchange of digital invoice data without relying on hard copy transactions.

The Ministry of Finance cooperated with Microsoft to implement an e-invoicing system, with a partner setting the technical, functional, and technological specifications of this system. The Microsoft Industry Solutions Delivery team reviewed these requirements, helped prepare the technical proposal, and recommended options so the ETA could choose the best solution for the entire system. As part of the Ministry of Finance’s digital transformation strategy, specifically within the Egyptian Tax Authority, E-Invoice and E-Receipt have become a cornerstone of the Egyptian Tax Authority’s digital transformation.

The e-invoicing and e-receipt systems are not tax collection systems; rather, they collect data pertaining to invoices and receipts. The former tax return setup is still in use alongside the new invoicing system. Mrs. Rasha Abdel Aal Radi, Head of the Egyptian Tax Authority, says, “The e-invoices have eliminated arbitrary estimations and reduced the tax examination to several hours, laying the foundations of an advanced tax system comparable to other countries, promoting investment opportunities based on advanced infrastructure in Egypt. The e-invoicing and e-receipt systems have enhanced clarity in business-to-business and business-to-consumer transactions and advanced the agency’s digital transformation.”

The ETA aims to have a comprehensive, integrated system for all markets so it can have an enhanced electronic database for everything in the supply chain, starting from goods production. It will then be able to track all taxpayers and transactions within its market. “We hope that the enhanced database will be the foundation for an AI system, including fully automated examinations and audits. This wouldn’t be possible without a Microsoft solution. With Microsoft, we designed and engineered the system to facilitate the process for all taxpayers as well as ETA employees. E-Invoice and E-Receipt are set to play a more integral role in the future, facilitating the seamless integration of data into tax return forms, thereby automating the filing process by auto-filling the tax return for taxpayers,” says Taymour.

One of the most important concerns about implementing the e-invoicing system was ensuring the databases and taxpayer information were completely confidential. The Egyptian Tax Authority found its best course was deploying e-invoicing and e-receipt systems fueled by Microsoft technologies, including Microsoft SQL Server, Windows Server, and Microsoft Power BI. These solutions provided the scalability, agility, security, and performance the ETA needed, enabling it to quickly create and deploy reliable and accessible digital services and automate business-to-business and business-to-customer transactions. Therefore, the Egyptian Tax Authority has a comprehensive view of the business transactions within the Egyptian market. a comprehensive view of the business transactions within the Egyptian market.

Encouraging tax compliance

Maha Ali, Head of the Media Office for the Head of the Egyptian Tax Authority and Website Manager, says, “The new e-invoicing solution requires individuals and companies to adopt the new procedures. We faced numerous challenges in achieving taxpayer participation.”

The ETA worked with Microsoft to help persuade taxpayers to adhere to the new electronic invoicing system. To achieve engagement, the ETA launched a multimedia advertising campaign, hiring celebrity spokespeople, posting videos, holding daily online seminars, and more—all of that to show the importance of e-invoicing to Egypt’s digital transformation.

Two strategies were particularly effective, notes Ayman Saad, E-Invoicing Project Manager at the Egyptian Tax Authority. The first one was soliciting feedback from tax-compliant companies during the pilot period of the e-invoicing system. He says, “We took comments seriously when companies implemented the technical solutions, and we provided full technical support during the pilot period to ensure the success of their integration with the system and the proper issuance of e-invoices and e-receipts. We shared their stories so the community could see how successful the new system is and how simple it is to use.” Saad continues, “The second strategy was the legal obligation the government made to the new system. Some companies rejected the implementation of this system. However, the Ministry of Finance’s approach was to make no exceptions at all from the implementation of the new system, obliging the tax community to successfully adhere to it.”

The ETA wanted the system to be easy for taxpayers to deal with, and for the solution to provide an economic vision of the market through the availability of analytics reports. It also wanted to better understand both low-risk and high-risk taxpayers so the ETA can better work with them and take positive steps toward combating tax evasion. This new system best meets all these requirements. Nancy Hamed, E-Receipt Project Manager at the Egyptian Tax Authority, says, “We knew we had a successful solution when it met the technical and functional requirements we had set.”

Results that help ensure tax justice

The Egyptian government is continuing its digital transformation. Each agency and bureau defines its own data classification and determines whether to implement on-premises, hybrid, or cloud solutions. Accordingly, the Ministry of Finance began its internal processes by reengineering software, rolling out the main tax system, and implementing other projects, such as the e-invoicing and e-receipt systems, call center, e-portal, and e-pay slip.

Implementing the new system has provided the ETA with a huge database of invoices and commercial business-to-business and business-to-consumer transactions. Hamed says, “The new system will let us implement tax audits remotely without the need to review all taxpayer hard copies. It helps us compare these documents with tax returns and reveals cases of tax evasion by detecting fictitious transactions and fake invoices.”

The new levels of reporting provide insights that were not previously available about both taxpayers and economic activity in Egypt in general. With new access to transaction data, the solutions make it possible for management improvements, better detection of fraud, and a higher level of tax equity. They also allow a comprehensive processing of e-invoices and e-receipts, facilitating the method of filing tax returns, which improves the taxpayer experience. Most importantly, the amount of taxes collected encourages the transformation of the shadow economy into the formal economy and the modernization of public services.

The e-invoicing and e-receipt systems have already made a big difference. The ETA is seeing a positive trend in compliance because the new systems are easier and enable taxpayers to choose the most appropriate channel for submitting their receipts and invoices according to their current systems, which will later serve as a foundation for pre-calculated declarations with the use of AI in the future.

Taking advantage of the vast amount of data collected, the ETA is now able to make more informed decisions and respond swiftly to market changes. The adoption of innovative technologies like AI can further enhance these capabilities, enabling early-stage fraud detection and generating greater economic value.

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