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The Ethiopian Revenue and Customs Authority (ERCA) to start implementing a pilot electronic price data base a system. The web-based price valuation database system is expected to standardize the prices of internationally traded commodities in real time. The new system replaces the manual CD-based price database which is updated once every six months. It is believed that the new system will ensure an equitable tax administration beyond modernizing and correcting its fragmentation and inconsistencies.    
The idea behind modernizing the database of the authority is preventing over and under-invoicing of imported commodities so that the tariffs for imported goods will be carried out in a uniform and acceptable manner across the board. An Indian IT company was awarded the project and has been conducting data base improvement for over a year now. The company has adapted the Indian experience to the current realities on the ground in Ethiopia. 
As opposed to free access to the CD-based price database, the new system restricts access to only authorized importers. The system lets clients fill in the required attributes of the goods they import and are classified as mandatory and optional. Such a classification prevents the authority’s officer-in-charge of custom-related services from levying custom duty based on the common name of goods which lead to the same tariffs for goods with different capacities. “The former system contains only general information about a given product while the new one incorporates the unique attributes of a given merchandise or raw material. Such a move helps in ensuring the formation of a prudent and modern tax system of administration which also guarantees equitable wealth distribution throughout the nation. For instance, an importer who imports computers needs to specify the country of origin, its RAM (Random Access Memory), processor speed, its brand and the likes, as opposed to the former practice of registering it simply as a computer,” said Befirdu Meseret, Deputy Director of Price Valuation Directorate of ERCA, while explaining the new system to large tax payers last Wednesday at the Ghion Hotel.
The authority has more than eight million commodities in its database system. It has already identified attributes of more than 95 percent of the commodities in its database.
In addition, the country is about to introduce a new customs proclamation which is aimed at easing and modernizing the customs procedures of the country.
The new customs law is expected to introduce structural adjustments in the functions of the authority and its human resource management. It also ensures the ‘free movement of goods’ for those organizations identified as Authorized Economic Operators (AEO), ease Post Clearance Audits (PCA), and decentralize the activity of the authority. So far, the authority approved 21 companies as AEO while more than 176 are in the pipeline for authorization.        
Under the new customs arrangement, each imported commodity will have its own branch. For instance, goods designated for industrial engagement [manufacturing sector] will have a structural branch that can handle it. The same holds true for other sectors of the economy. The currently used customs law requires all goods to be brought to the customs check points. But the new amendment will introduce new ways in which customs officers can proceed to where the goods are for goods imported by economic entities identified as AEOs. It relieves congestions at checkpoints giving room for inspecting imported goods at the site where they are unloaded. Such a practice saves cost and allows the projection of inspection completion time.
Ethiopia is also undertaking a nationwide study on its tax collecting potential at a cost of more than 11 million birr. The study will identify the revenue generating capacity of the country. Ethiopia’s share of taxes in the Gross Domestic Product (GDP) is a little over 13 percent, which is well below the sub-Saharan average of 18 percent. In a bid to catch up with the continental average, ERCA plans to raise the figure to 15 percent in the coming three years. 
A UK consultancy and research firm, Adam Smith, is conducting a study aimed at identifying the country’s tax collecting potential. Though the contract agreement to wrap up the study was slated for two years, the firm has vowed to complete it within a year.     
Apart from identifying the country’s tax generating potential, the study will also serve the purpose of the Federal Grant Formula. When the study is completed, regional states are provided with federal budget subsidies which will fill the gap between their tax collection capacity and their development needs. According to officials, if a given regional state fails to meet its tax collection capacity, it will shoulder the burden for such incapacity. Regional states are advised to focus on collecting Turnover Taxes (TOT) since many organizations not registered for Value added Tax (VAT) are administered by them.   
The contribution of domestic tax surpassed that of customs duties for the first time in the history of the country according to official reports. The shift in revenue base is attributed to massive reform programs the authority is currently undertaking. The authority also collected 5.5 billion birr in the concluded Ethiopian budget year in tax arrears.
Reform programs being undertaken by the Ethiopian government in relation to tax and customs duty administration is getting the attention of the international community.    
“A UK firm is working with the Ethiopian authorities to help on tax collection. In the last decade the amount of tax collected increased by around seven-fold,” said David Cameron, the British Prime Minister, while addressing the World Economic Forum (WEF) held at Davos, Switzerland, last Wednesday.
Two years ago, when the authority began its plans envisioned in the GTP (Growth and Transformation Plan), the contribution of customs duties to national revenue was around 67 percent. Now, that trend has been reversed. The contribution of domestic tax has reached a little over 51 percent of the total revenue collected while that of customs duty contributed 48.8 percent in the concluded Ethiopian budget year. The authority spends 0.83 birr to collect 100 birr in revenue.     
According to ERCA, seventy percent of the country’s tax revenue comes from less than one thousand business entities. 
The authority plans to raise 101 billion birr this fiscal year, portraying a 44 percent growth, compared to the nearly 71 billion birr it collected in the previous budget year. The authority collected 22.5 billion birr in the first quarter of this budget year, surpassing its plan of collecting 21 billion birr. This is a 41 percent increase as compared to the first quarter of the 2011/12 fiscal year.