Capital Ethiopia Newspaper

Minority pays the most tax

Seventy percent of tax revenue comes from less than one thousand people according to the Ethiopian Revenue and Custom Authority (ERCA). The Authority made the claim at a discussion with small business owners at City Hall in Sidist Kilo.
Participants of the ERCA discussion voiced concerns about the lack of a level playing field, legal receipts for some commodities and the legal framework for taxes on micro enterprises. The participants who are classified in four groups and number over 1,500, claim that small enterprises are exempted from paying taxes, others argued there was a grace period of three years. However, they were vindicated in relations to a legal framework and a grace period but promised to solve the receipt problem.      
“There is a proclamation that deals with non-profit enterprises that says they do not have to pay tax. If it is for a profit enterprise they do need to pay tax.  A lot of people may not be informed about the tax law but we are working to educate them,” argued Awol Mohammed, a Senior Officer in the Addis Ababa Micro and Small Enterprises Development Office (AAMSEDO).
Officials at ERCA and AAMSEDO were busy for two days last week explaining all the specifics of the tax system. Officials handled a wide variety of questions from people. “The questions raised at the workshop are very significant. Every question, whether it is silly or complex has a meaning. It depicts where we [both tax officers and the business community] are concerning tax related issues. It determines the work required on the part of ERCA to inform the business community about tax. ERCA needs to work very hard to educate the public, so we can see more development,” argued a participant.
Construction, electric installation, sanitary, textiles, hand crafts, sewing, leather and leather products, metal work and engineering, wood work and urban agriculture were among the 1,500 small business representatives. The workshop gathers more than 1,500 representatives of small and micro enterprises. In doing so, ERCA has increased the domestic revenue from mere five billion birr five years ago to 51 billion birr last year. More than 70 percent of this revenue was collected from 962 tax payers classified as large tax payers according to information obtained from the authority.  
ERCA in its bid to create a prudent tax scheme introduced a cash register system. Since its introduction, the authority has managed to install 34,991 cash register machines at 30,509 business entities. The authority has a plan to increase the number of cash registers in the countryto 128,891 reaching more than 100 thousand businesses at the end of this fiscal year.
“We know that there is a problem with receipt provision. We are working very hard to solve it. However, we can not solve the problem related with illegal trading on our own. We need the support of legal traders in particular and that of citizens in general. Together we can solve any problem. We have developed a format for some construction commodities which are currently traded without receipt,” said Anteneh Tesfaye, Team leader of Sales Register Machine Administration and Implementation of ERCA.
Ethiopia collects tax directly from income and indirectly from consumption. Income tax from business and salary constitutes direct tax while value added tax, excise tax, and turn over tax constitute consumption tax.