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A new tax proclamation is expected to be tabled for the newly elected parliament that will congregate in the coming Ethiopian New Year, Capital learnt.
The law will replace the existing tax proclamation, according to the officials at Ethiopian Revenue and Customs Authority (ERCA).
Some years back, the Ministry of Finance and Economic Development (MoFED) and the authority had said that some of the tax proclamations are under revision.
Beker Shale, Director General of ERCA, said the draft document will be discussed between stakeholders in the coming two months.
He said that the final draft will also be presented to the Council of Ministers before it is sent to parliament for final approval.
“The new tax policy takes into account the country’s growth status, the demand of the Growth and Transformation Plan (GTP II), as well as attracting international business,” Beker said.
The revised proclamation also aims to alleviate the challenges that existed in the current proclamation. The law also considers ways of expanding the tax revenue.
Though there are several types of taxes, the director general did not distinguish on which type of taxes the revision is made. Sources said that income tax will be one of the taxes that will be amended. Excise Tax, VAT, Turnover Tax, and Sur Tax are other taxes that are supposedly amended, according to ERCA experts.
A year ago, ERCA disclosed that it is drafting a new income tax proclamation. Even though the authority is mandated to draft tax proclamations and laws, it is MoFED who will present the proclamation to parliament or the Council of Ministers after it evaluates the drafted law.
In 2014, parliament had ratified a Customs Proclamation that targeted to boost the country’s economy and the manufacturing sector.
Discussion with high taxpayers
ERCA discussed the draft with high tax payers and give recognition for stakeholders and tax payers who registered good performance.
At the discussion held on July 23 at UNECA, the private sector raised many questions that are related with tax and customs issues.
Participants stated that the authority has to expand the number of high tax payers which currently is 1,300. They also recommended that ERCA should establish a training facility to slender its skilled manpower deficit.
“You have to consider paying a good salary to staff to keep them from flocking out and to prevent corruption,” Dr. Arega Yirdaw, CEO of MIDROC Ethiopia Technology Group, said. On the day, eight affiliates of MIDROC Group grabbed trophies including two that are led by Dr. Arega.
Participants recommended that the authority should accommodate the growing interest of FDI and have a sense of urgency. “Every day, new systems are introduced but we aren’t keeping the pace with new trends,” Fasil Tadesse, President of the Ethiopian Textile and Garment Association, said.
He added that the private sector is still affected by customs issue and he recalled an instance that involves the duty free scheme one of his members had been plunge in with the customs body.
“All the staff and management of ERCA should have eagerness to serve customers,” one tax payer said. Retreating from responsibility is one of the challenges that customers complain about on several occasions. This issue was also raised at the discussion. A bunch of participants said the bureaucracy still continues to be one of the major challenges in the pursuit of pure and fast service.
A participant who represented Orchid Business Group said that a special attention and facility should be provided for high tax payers. He said that the impediments at ERCA “have become a hidden cost in the investment.”
Contraband was named as the major challenge for producers that follow the legal system, according to Dr. Besrat Gebregziabher, Owner and Managing Director of Noble and Trustworthy House Plc. He said that it has become difficult for companies to compete with illegal traders. “Sometimes we are forced to destroy products that have shorter shelf time because it is difficult to get competitive prices to sale the products on time.”
The authority head admitted that the country is challenged by contraband. He said that good are smuggled in by a rig of illegal traders and traffickers. “The system has more than three chains between the line of smugglers and final trader. So the society, itself, should support the combat against contraband,” Beker said.
Beker accepted that lack of adequate employees and disciplinary violations are hampering businesses. “We have over 10,000 employees but some lack ethics and ability,” he said. He, however, put some responsibility on tax payers who try to bribe the customs employees. “We didn’t have tax payers that ask for their right,” the head said giving an explanation why ERCA staff partly did perform under capacity and ask for bribes.
He also admonished tax payers who did not attend discussions that are organized by ERCA.
“Even if we invited tax payers to attend discussions, they’re not interested to give their opinion or to speak openly of the problems they face,” he stressed.
Beker said it is high time for the marketing system to be modernized. “The system still follows the traditional mode. The private sector has to modernize the trading system, which will help improve the tax collection system,” the ERCA head said.
Achievements, targets, recognition
In the last fiscal year, the authority has collected 117 billion birr, higher by one billion birr from the projected revenue. High tax payers’ contribution was notable in the above target collection. The director general stated that the performance registered in Addis Ababa was very annoying. ERCA had targeted to collect 22 billion birr from the city, but it ended collecting 17 billion birr.
The director general stated that the increasing illegal business is the main reason for missing the target. “Illegal trade in Merkato, the biggest market place in the country, is very high,” he said.
“Tax evasion is rampant in Merkato. Importers, wholesalers and retailers should be responsible for tax evasion,” he claimed.
“The authority will focus on importers and wholesalers that are part of the high taxpayers’ category because they typically refuse issuing receipt for transactions,” he added.
In the current fiscal year, the government has targeted to collect 142 billion birr from tax and non-tax sources.
The head said that majority of the revenue is expected to be collected from high taxpayers.
Public enterprises, government offices and the private businesses were also given recognition by the authority. Forty eight private sector and ten public enterprises were recognized besides the government offices, higher education institutes and media houses.
“We honor your effort and your fulfillment of responsibility,” Debretsion Gebremichael (PhD), Deputy Prime Minister for Economic Cluster and Minister of Communication and Information Technology, said after awarding trophies for the selected private sector members.
He said that the contribution of the private sector towards supporting development projects in the past GTP was notable. “You are the key to expand financing of the country’s development projects by providing adequate tax,” he added.
The authority stated that companies and the public entities that were recognized on the day are selected on different criteria including accelerating the taxing system and adhering to the taxation plotn