The council of Ministers approved and referred to parliament to sign the Convention on the Recognition and Enforcement of Foreign Arbitral Awards in its regular meeting on Saturday December 14.
This will make arbitral awards made in other countries to be enforced by a court in Ethiopia without any other proceedings.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention, was adopted by a United Nations diplomatic conference on 10 June 1958 and entered into force on 7 June 1959. Ethiopia was one of the few countries that did not sign this.
The council of Ministers
Half Drunk
Bottlers like new tax method, want lower rate
Water and soft drink bottlers are complaining about the revised excise tax rate a topic that has fostered much discussion over the past couple of months.
The new way of calculating the tax is expected to be approved by parliament this week. When that happens, excise tax will be deducted from sales or revenue instead of from production as is currently the case.
Almost all bottlers are happy that tax will be calculated from sales because it is easier and pushes the tax to the users but they want the government to revise the rate.
Currently the soft drink industry must pay 30 percent and water bottlers 20 percent for excise tax.
Both bottlers say the rate is too high. The Ethiopian Bottled Water and Soft Drinks Manufacturing Industries Association (EBWSDMIA) told Capital that they want the revised rate on bottle water to be reduced to 15 percent and 25 percent for soft drinks.
Even though the percentage has decreased both will pay more taxes than before. This is based on studies that both the soft drink and water bottlers conducted showing that the new rate with affect each company and the collective sector by making them pay 50pct more tax than they currently do.
Ashenafi Merid, General Manager of EBWSDMIA, told Capital that a single water bottler’s excise tax payment is now 2 million birr it will climb to 3 million birr.
The difference is based on the new calculation which will come from sales and will not take into account expenses like depreciation and other costs including production.
“The current excise tax calculation based on production allows us to deduct the depreciation and other cost, but the new calculation will not consider that so the payment will increase,” he said.
Two weeks ago the Ministry of Finance, who is responsible for drafting these kinds of laws invited bottlers to evaluate the draft rate and comeback with their feedback.
The water bottlers did so and said that for the tax shall be equivalent with the current 20 percent of production, the new rate has to shrink from 7 to 10 percent, according to Ashenafi. “If the draft proclamation is going to be effective the excise tax payment for the water industry will be very high,” Ashenafi added.
On the other hand the analysis that the Coca Cola bottler, East Africa Bottling, undertook and Capital obtained indicates that the new rate should be reduced to 14 percent to meet with the 30 percent of existing excise tax, while the draft document imposes 25 percent on the soft drinks.
The study documents that East Africa Bottling undertook stated that the excise tax is being rebased from cost of production to revenue which is welcomed as it will be easier to administer with a clear understanding by the tax payers.
“The current base of 30 percent on cost of production is equivalent to about 14 percent of our revenue. We understand that the ministry has a model that is using to determine the conversion from cost of production to revenue,” it explained.
The company that recently announced the USD 300 million investments in the coming five years claimed that the new law will significantly affect the company.
Looking at upcoming year, if the company does not take price and the excise tax is at 25 percent on revenue, the impact is Birr 797m cushioned by excise reduction on sugar of Birr 86m hence a Birr 711m. If the company takes price to mitigate the impact on increase of excise tax at 25 percent of revenue, there will be a volume loss of 15 percent in the first year and a net loss of Birr 123m.
Ashenafi claimed that even thought they have undertaken their analysis and come back with their feedback the draft proclamation has already been sent to the Council of Ministers that approved it a week ago and sent it to the parliament.
“Our last option will be engaging on the meeting on the public hearing and a meeting with standing committee before it is ratified,” he added.
He argued that this law is a disaster waiting to happen bottlers will be forced to lay off workers because of the increased expense.
In his latest press conference Eyob Tekalegn, State Minister of Finance, said he is aware of the concerns “There is space in the ratification process as it will be seen by the standing committee with stakeholders,” he said.
Finance Ministry to supervise public projects
In a change of practice, the Ministry of Finance (MoF) will oversee all public projects.
The government has been criticized the way it has handled projects. Some have been delayed while others have cost a lot of money. For example, one fertilizer factory, and several sugar factories have consumed billions of birr but have not even been finished.
“Project handling is one of the government’s major weaknesses, so we are trying to improve this and control it properly,” Eyob Tekalegn, the State Minister for the Ministry of Finance said. “The trend has changed. Before any new project starts a feasibility study will be undertaken in detail and before the project comes to MoF for approval the Planning Commission should evaluate it in detail,” Eyob said.
He added that the government has also applied a Public Investment Management (PIM) protocol allowing the Planned Commission to evaluate any plans regardless if it fulfills the investment criteria or not.
The Civil Service Commission has approved establishing the department which will follow ongoing projects under MoF.
“Based on the approval of the Civil Service Commission the structure of public project follow up directorate is being established,” he added.
“The directorate formation process has taken time because it has to be approved by the commission but now the problem has been solved,” he explained.
The decision has given power to MoF to follow all projects. Eyob told Capital that his Ministry will follow the projects which previously were followed by relevant government bodies for instance the sugar sector was followed by the Sugar Corporation and the fertilizer industry project was followed by the Chemical Corporation.
He said this allows the government to control all projects directly instead of leaving them to sector actors.
Questionable land policy vexes investors
Investors are asking the City Administration of Addis Ababa to restart leasing land faster. Since Takele Uma became mayor, land leasing has been suspended. According to sources about 3,000 individuals are registered asking for land to develop but most have not received a reply.
A notice the City Land Development and Management Bureau issued on October 14 indicated that they won’t take any more requests for land.
“We are not looking to get land through special treatment,” an investor said. They insist the city administration recommence the regular land lease.
Experts in the sector expressed their fear that stopping the land lease will open the sector to corruption. It is unclear why the city administration does not want to start the land lease but at the same time it facilitates plots for some few individuals through other deals.
“This is the implication of misuse of the public property,” the investors claimed.
Sources said that currently the city administration is busy returning lands to previous landlords or farmers’ children that were displaced from their plots.
One observer said that those who are receiving the lands are not really the owners or the families who own the plots. After they received the land they are engaged in transferring the plot as soon as possible.
At the same time some of the lands are provided to selected individuals for investment throughout the city including in the heart of Addis Ababa.
Capital has been trying to get clear information for two weeks from Tesfaye Lemma, head of the city lease office under the city Land Management and Development Bureau, about when the city will recommence the lease but he refused to give information.
