The Ministry of Revenue (MoR) announced that it would conduct a risk-based audit of over 3,089 business during the current fiscal year. About 2,179 companies will undergo a risk-based tax audit which is a significant increase from previous years.
“Because there are many uncollected taxes in Ethiopia the audit gap is expected to rise parallel to our auditing capacity,” said Zeru Gebru a director at the Ministry. “We have about 450 auditors and based on our performance audits are going to increase.”
The Ministry uses 22 parameters to determine risk. Some major red flags that will bring about an audit include consistently declaring loss or an ongoing loss or listing many unnecessary expenses. Known as cost aggravation, this is many done by construction contractors who often have declared purchases that do not actually exist.
Another huge red flag is when the assets and debts are out of proportion. If debts keep increasing and assets keep declining the Ministry is likely to investigate for illicit activities.
Desk audits will be conducted on companies listed as medium risks. These are conducted over a few days by going through documents published by the taxpayer.
Another problem frequently found in the construction sector is bulging costs, when companies who frequently make large profits make many purchases which can then be inflated illegally.
“We will trace if the cost is real or not only by conducting the appropriate audits,” said Zeru.
The large taxpayers’ office (LTO) is conducting its risk-based audit of its 272 taxpayers who have entered into a high-risk zone based on the 22 parameters. The branch office currently has 770 taxpayers after the government decided to take the public enterprises out of the branch office last year.
Among the total risk-based audits plan by the LTO 46 of them are companies working in the import and export area. The Office which consults the companies on the high-risk existence in the sector the 172 Importers and exporters participated and raised their issues to the ministry. ERCA faced 10billion birr revenue gap for the quarter
In its quarterly report, the ministry announced that the collected revenue was 3.21 billion birr lower than planned. Revenue to be collected from the inland tax was aimed to be 28.8 billion birr. However, this was declared to be 7 billion birr, compared to collectable customs duties which raised the total revenue uncollected to 10.72 billion birr, according to Netsanet Abera, Deputy Director at the Authority.
“The decline in revenue is lower than the same period last fiscal year,” Netsanet told Journalists. “We are hoping the gap will be filled with the current month’s revenue collection when 90percent of the tax payers will pay their annual taxes.”
More companies to face audits this year
Berhan Bank profit slightly declines
Even though they are a new player in the financial industry young Berhan Bank (BB) has continued growing despite a slight reduction in profits. BB has amassed 1.5 billion birr total income for the year which is an increase of 36 percent. As usual interest is responsible for most of their income. The financial statement indicated that the interest income has expanded by 60.5 percent compared with a similar period a year ago reaching 1.1 billion birr.
BB claimed that their profits had gone down somewhat because of the country’s socio-economic situation which has put pressure on the entire banking industry. According BB’s statement in the 2017/18 financial year the bank earned 410 million birr profit before tax, which is a slight decrease from last period’s 428 million birr.
The profit without tax and other expenses stands at 311 million which was 316 million birr a year ago. The earnings per share also declined decrement compared with the 2016/17 performance. According to the annual report the earnings per share was 20.4 percent, which means it was 30 percent per 1,000 birr share.
On the other hand the bank’s assets reached 14.1 billion birr, which is an increase of 33.5 percent compared with the preceding year’s 20.5 billion birr.
For the year Berhan’s capital strength continued significantly. In 2017/18 the total capital increased nearly 20 percent or one fifth compared with the 2016/17 fiscal year.
According to the report, the bank’s total capital has reached 2.2 billion birr with a paid up capital of 1.7 billion birr, which is an increase of 22.4 percent.
In terms of deposit mobilization the bank was able to collect almost 11 billion birr which is a growth of 41.6 percent compared with a year ago.
From the deposit mobilization, savings took a share of 53.1 percent followed by demand deposits. One of the achievements for deposit mobilization is the expansion of branches and services which has led to a 43 percent increase of depositors that has reached 523 thousand.
The bank’s outstanding loan performance has been stood at 7.2 billion birr and grown by 33 percent. The weak economic condition and export performance has affected the bank’s international banking activity.
With regards to international banking BB mobilized USD 108.5 million, which is a 13 percent decrease compared with the 2016/17 financial year.
Bank of Abyssinia reaches one million depositors
The Bank of Abyssinia (BoA), one of the first two private banks since the free market was reintroduced in the early 1990s, has continued with several achievements in the sector in addition to surpassing the one million mark in their number of depositors.
In the fiscal year that ended on June 30 BoA amassed a total income of 3.3 million birr which is a growth of 37.8 percent. Expenses grew significantly at 47 percent. Because of the increase of depositors interest took 42 percent of the total expenses.
During the year the bank registered nearly 766 million birr in gross profits before tax. Gross profits increased by 89 million birr which is a 13 percent increase from 201/17. Accordingly profits after tax reached 563 million birr which is a 52 million birr increased compared with the preceding year.
The bank that has 2.56 billion birr paid up capital has registered assets of 31.9 billion birr for the year, which was 25.8 billion birr a year ago, while the capital has also stood at 4.3 billion birr which is a 27 percent increase.
The number of depositors at the bank has dramatically increased. The statement of BoA indicated that in the 2016 /2017 fiscal year the number of depositors stood at 750,000, while it has now increased by 35 percent and reached more than one million.
Besides the growth of the number of customers the bank’s deposit mobilization went up by five billion birr within a single year.
The report indicated that the total deposit mobilization at the end of June reached 26 billion birr that was about 21 billion birr a year ago. The growth of deposit mobilization has placed the bank as one of the most competitive banks and a key factor in the sector.
In terms of advances and loans BoA has facilitated close to 4 billion birr for the fiscal year amounting to a total of 18 billion birr.
Loans and advances grew by 28 percent compared with the preceding year. For the year term loans and over drafts grew by 35 percent. According to BoA’s financial report, the proportion of loans indicated that term loans took the lion’s share by 66 percent and over draft and advances stood at 21.3 and 12 percent respectively. From the total loan’s domestic trade took the highest portion followed by exports, construction and industry.
The year saw a record shortage of hard currency but BoA was to mobilize USD 382 million which is a decline of 10 percent compared with the performance in 2016/17 financial year. Declines were in incoming transfers, money transfers, and interest on corresponding banks but other factors exhibited positive performance, according to the report.
Last fiscal year the bank has opened an additional 53 branches increasing the number of branches to 286. In terms of the modern IT banking sector development the bank has registered marvelous performance in mobile and card banking. The report stated that mobile banking users doubled and the card banking service grew by 83 percent.
Wegagen Bank’s profits skyrocket
The gross profit of Wegagen Bank has climbed by fifty percent in the past fiscal year.
The statement that the bank sent to Capital indicated that in the 2017/18 fiscal year the bank earned 1.05 billion birr which is an increase of 49 percent compared with the 2016/17 financial year.
The Bank’s profit has consistently risen over the past three years.
“The significant increase in profits is largely because total income increased. It amounted to 2.34 billion birr which is a 39.6 percent increase from the previous fiscal year,” the statement elaborated.
“This development puts Wegagen in the category of one of the few private Banks that managed to gross a billion birr profit,” it added.
Araya Gebre-egziabher, president of the Bank, remarked that the Bank registered a commendable growth in all aspects of operation highlighting key achievements of the Bank in the fiscal year.
He indicated that the Bank’s paid up capital grew 11 percent to reach 2.3 billion birr in 2017/18 from 2.1 billion at the end of 2016/17 fiscal year.
The total capital including reserves has also increased by 19 percent to reach 3.8 billion birr, while the total assets rose to 27.3 billion birr with a 33 percent increase.
Similarly, the total deposits mobilized increased by 31 percent to reach 20.5 billion birr in 2017/18 from 15.6 billion birr in 2016/17.
For the year the Wegagen’s total loans and advances facilitated for customers grew to over 15.1 billion birr from 10.2 billion in 2016/17 twhich is almost a 50 percent growth rate. The Bank opened 64 new branches across the country expanding its network of branches to 277.
Araya also indicated that the Bank has carried out several projects aimed at modernizing its infrastructure in a bid to provide better services to its customers. The most notable of such projects carried out in the 2017/18 was the replacement of its core banking system with the Oracle Flex Cube which has significantly transformed its operational performance and customer service delivery to the highest level of efficiency.
It is also undertaking a project to build a new state of the art data center in its newly inaugurated Headquarter Building on Ras Mekonnen Street. Wegagen’s new IT infrastructure has enabled it to provide innovative and value adding financial services, including the newly introduced air travel payment services in collaboration with Ethiopian Airlines.
The bank has inaugurated one of the icon 33 storey buildings that consumed more than 800 million birr for the capital as its headquarter.
