Capital Ethiopia Newspaper

Duty free costs Ethiopia 12 billion birr

The Ethiopian Revenue and Custom Authority (ERCA) has given duty free privileges to strategic investments and diplomats exempted from custom duty amounting to 12.3 billion birr in the past six months of the Ethiopian fiscal year, up from last year’s 11.3 billion birr. This is almost twice the amount collected in Addis Ababa annually Capital learnt.
“Had there not been duty free privileges, the country would have raked in 47.4 billion birr in total from taxes and custom duties. Since the duty free privilege is entrusted for strategic investment projects and diplomats, the authority has allowed a duty free privilege amounting to 12.3 billion birr. This represents 35.3 percent of the revenue collected in the first half of the year,” said Efrem Mekonen, head of the Authority’s communication department.
ERCA has introduced an incentive mechanism for those parts of the community who tip it with regards to misdoings in relation to tax and customs duty in its bid to discourage illegal practice. The authority has received 2,632 tips in the past six months, out of which 1,643 were found to be correct while 989 were proven wrong. The authority has paid close to 24.8 million birr compensation to those who gave the authority the right information. For instance, thanks to the effort exerted by whistle blowers, the authority raked in 124.4 million birr from goods smuggling activity alone. 
ERCA has increased the domestic revenue from a mere five billion birr five years ago to 51 billion birr last year. More than 70 percent of this revenue was collected from 962 large tax payers, classified as such by the authority.
The federal government tasked ERCA to bring in about 71 billion birr in taxes and lottery sales’ profit in twelve months to partially cover the year’s record budget of 117.8 billion birr. During the first six months of the fiscal year – July to December – ERCA almost managed to meet half of the year targets by collecting 35.1 billion birr. Its own ambitious target was  of amassing over 38 billion birr in the period.
Ethiopia collects tax directly from income and indirectly from consumption. Income tax from business and salary constitutes a direct tax while value added tax, excise tax, and turn over tax constitute consumption tax.                 
This year’s performance of 35.1 billion birr is greater than last year’s same period by 10.2 billion birr which is a 40 percent boost in revenues. The authority collected 9.8 billion birr from direct tax, 24.8 billion birr from indirect tax, and 428.5 million birr from other sources of revenue. More than 37 percent of the revenue earned from indirect tax comes from Value Added Tax (VAT).  
Ethiopia has so far managed to cover 64 percent of its budget from domestic sources, 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. ERCA  plans to increase the number of cash registers in the country to 128,891 reaching more than 100 thousand businesses at the end of this fiscal year. In Addis Ababa alone the authority managed to install 10,519 cash registers machines. Meanwhile, around 1,307 machines have been installed in Amhara, Tigray, Somali and Sothern Nations, Nationality and Peoples regional states in the last six months of the budget year.
ERCA is said to be needing 13,464 employees. Currently, it is carrying on its operation with only 7,423 staff. This represents 55.1 percent of its human resource requirement. The authority has employed 619 fresh graduates who are currently taking training and 615 experienced ones in the last six months of the budget year.  In the mean time, 237 employees left the authority, 65 of them being dismissed for disciplinary reasons, 157 for personal reasons and 15 passed away.
The federal government has been netting over four billion birr every month during the past year, another sign that reforms undertaken by the authority are evidently bearing fruit. Thirty six billion birr was for example; the intake of ERCA in the first nine months of last year, a figure that was more than the total revenues of the federal government a year earlier. The latest performance is about six billion birr while duty free privilege is more than two billion birr, on average, a month.
The federal government is further pushing for more money; in the five year economic plan of the country, ERCA is tasked to fourfold the latest tax and nontax related revenues to 150.6 billion birr by 2015. 100 billion birr is the goal set for next fiscal year. Consecutively, 123.9 billion birr and 150.5 billion birr marks are the last two year’s goals outlined in the five year strategic plan that dusks in 2015.