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The Ethiopian Revenue and Custom Authority (ERCA) is setting its sights on the biggest open air market in Africa, Merkato.
The authority claims that Merkato located in Addis Ketema sub city is the biggest tax black hole in the country. They say around 25 percent of traders are complying with tax law and that there is inconsistency in the amount of tax paid even when businesses try to comply. They also say that around nine thousand businesses are unlicensed which is almost half of the 18 thousand businesses that are there.
To combat this, ERCA created the ‘Merkato project’ which will attempt to increase the number of legally licensed businesses in Addis Ketema sub city to 22,500 which is 4,500 more businesses than currently exist. They hope to achieve this goal within a year through opening two large tax offices which can accommodate close to 1,000 employees and 10 tax collection centers spread over each of Addis Ketema’s ten Weredas. The project will be administered by Addis Ketema sub city.
“We are all citizens of one country, working for a common goal; creating a peaceful and prosperous Ethiopia where economic, social and political justice prevails. So, let us join hands for the common good,” said Gebrewahid Welde Giorgis, Deputy Director General of ERCA, responsible for enforcing tax policy. Ato Gebrewahid spoke to the business community last Wednesday at the National Lottery Administration hall in Piazza.
Only 100 people showed up at the convention center for the conference. ERCA had expected around 500 people.
Most businesspeople at the conference agreed that the tax system should be improved and business owners consulted when implementing changes.
One business owner said ‘tax policy and enforcement need to be pragmatic and careful’.
“The concerns of each business sector needs to be addressed and that means talking with all the stakeholders and bringing the people who pay taxes together with the people who enforce the tax policy. Ambition by itself does not bring results,” he said.
There are 10 sub cities with 114 Weredas in Addis Ababa city. Addis Ketema, which is one of the 10 sub cities, has 10 Weredas under its administrative structure. It is the largest trading center in the country. It is estimated that half of the financial transactions in Ethiopia take place in Merkato, according to data obtained from ERCA.
In Addis Ababa alone there are 230,000 taxpayers based on the information obtained from ERCA. The city administration collected 2.47 billion birr from direct tax which includes business income tax, salary income tax, and rental income tax in the last Ethiopian fiscal year. The salary income tax alone raked in 1.76 billion birr while 135.5 million birr came from rent income tax. Individual business income tax has brought less than what salary income tax did. It brought into the national budget only 525.5 million birr. The administration also raked in 1.49 billion birr from indirect tax of which 557 million birr came from municipality services.