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‘We have taken several measures to fight corruption,’ Asfawessen
The management of the Ethiopian Revenue and Customs Authority (ERCA) met with high tax payer businesses on Friday, May 31st, to discuss the recent and ongoing crackdown launched by the Anti-Corruption Commission targeting the authority and their partners from the business community. Even though the meeting was convened to discuss the issue of the grand corruption case that gripped the country for the past couple of weeks and to gain information to further clean-up the authorities’ service, the tax payers seem to give priority to voicing the usual problems they face with the tax authority rather than the main issue stated on the invitation letter.
The ‘retain earning tax’ levied by the authority on dividend earnings was the major concern voiced by the participants at the discussion held at the Addis Ababa Conference Centre this Friday. Following ERCA’s decision to claim back payment of accrued tax on dividend, with interest and penalty, it declared is due since late last year, it has remained the major debating issue between tax payers and the authority. Tax payers insist that the retained earning tax imposed by ERCA is illegal, while the authority maintains it has a right to collect it, and continues to levy the sum it planned to collect.
The contention on the dividend tax comes from the definition of when the tax should be levied. ERCA maintains that whether shareholders are paid dividend or not, so long as there is an accumulated earning, tax must be levied on it. Participants then questioned why ERCA did not collect the dividend tax every year if the regulation has room for it.
Another issue the business community felt strongly about was that there is an information gap between the management of ERCA and other staff members, which they say has created several obstacles to implement changes in the authority.
They noted that illegality is related with such kind of irregularities. “For instance the duty-free scheme implemented on selected investment sectors has created confusion and allowed misdemeanours among the authority’s employees and investors. In my opinion, several corruption cases are related to this scheme,” one of the participants from the business community said.
“The fact that taxes, rules, regulations and directives are issued by ERCA, which is also the implementing authority, and on the other hand also has the right to charge and detain those it deems are guilty, are the things that give ample opportunity for the employees to involve in corruption and bend the system of the authority,” participants said.
Traders also blamed the authority that it is ERCA’s behaviour that is forcing business people to lose confidence in the system. The participants further noted that it is the lack of integrity between ERCA’s employees and customers and the lack of transparency between the head of the establishment and its staff that has opened the door for corruption.
Kaidaki Gezahegn, Deputy Director of Operation, Design and Development, Abraham Nigussie, Deputy Director of Change and Modernization and Asfawossen Aleneh, Branch Head of High Tax Payers Office of ERCA, chaired the meeting and responded to the issues raised, including the dividend tax and the new domestic tax reform.
The officials explained that the decision to collect unpaid dividend tax will remain in place, and they stressed that the business community has to pay the accrued tax based on the direction enforced a few months ago.
Meanwhile, the officials recognized ERCA’s failure in delaying to collect such tax in the past several 6 to 7 years. “We have accepted responsibility for our failure; therefore, we have decided to drop the interest and penalty claims we had first made, and we also offered payment options that enable tax payers to pay in instalments over a long period of time,” they said.
In the mean time however, the officials promised to solve existing problems the authority faces, noting that ERCA has completed the draft reform of domestic taxes that will help harmonize the tax system. The draft has been sent to the relevant government office for evaluation.
Asfawossen declared that his office, the Major Tax Payers branch, has set a target to collect 35 billion birr during this fiscal year ending on July 7, 2013, and has already collected 28 billion birr in the first ten months. “We expect to meet our target by the end of the fiscal year, so you have to pay the expected amount before the deadline, or else we will force you to do so,” he warned.
The branch head further stated that the authority has taken several measures to fight corruption by itself in the past years, but lack of professionals and an efficient team is the major challenge the authority faces. “We are undertaking several measures to build our employees’ efficiency and fight corruption,” he said. “But the current measure taken by the Federal Ethics and Anti Corruption Commission has caught the public’s attention due to the media,” he said.
On Friday May 10, Melaku Fenta, the long serving Director of ERCA, Gebrewahid Woldegiorgis, Deputy Director of ERCA and Head of Law Enforcement of the Authority and Eshetu Woldesemayat, Chief Prosecutor of ERCA were detained on allegations of corruption along with several other ERCA head office and branch officials.
The allegation has also included heavyweight businessmen and other individuals and is still ongoing as of this week. Abraham told Capital that he and Kaidaki took over the duties and responsibilities of their imprisoned colleagues.
He said that they are still waiting for the government to make new appointments; it is the mandate of the Prime Minister to assign both the Director and the Deputy of ERCA.