Ethiopia Focuses On Tax Collection

by Lorys Charalambous, Tax-News.com, Cyprus

08 May 2009

The Ethiopian government has redoubled its efforts to tackle tax evasion and announced that it will not cancel businesses’ tax debts in order to win votes in next year’s elections.

The Ethiopian tax and customs authority has announced success in a number of crackdowns on merchants avoiding paying Value-Added Tax (VAT) as well as a number of prosecutions and fines on people abusing duty-free import tariffs on cars. The tax and customs authority has intensified its compliance efforts to provide government coffers with much-needed revenue.

The tax and customs authority has this week announced a successful investigation into vendors who are VAT-registered but do not provide VAT receipts on purchases. In all fifteen vendors were arrested and released on bail. When the vendors are sentenced, they are likely receive fines between ETB10,000 and ETB100,000 and spend between two to five years in prison for the offence.

In addition the tax authority has also contacted businesses with a turnover greater than ETB500,000 and urged them to register for VAT in order to avoid penalties and prosecution. Currently 1,500 companies are VAT-registered. The tax authority aims to increase this number to 10,000 by the end of the year.

In a separate crackdown with a significantly larger return, the tax and customs authority seized more than 7,000 cars – proven to be the proceeds of abuse of the tax system. The car import duty exemption was introduced to encourage expatriates to return to the country by reducing fiscal barriers to entry. Some people however illegally abused the system and imported cars to sell to third parties tax-free to make a profit. The tax authorities are now forcing people to pay the duty on their cars. Out of the 7,000 which were impounded 3,500 have negotiated paying it over a two year period while 1,000 cases remain unresolved. The investigation is likely to provide several million Birr for the government.

The government has also been in contact with numerous businesses with arrears and negotiated timeframes in which they will pay their debts – generally over a period of less than a year.

Speaking to a press conference on April 30, Director General of the Ministry of Revenue Melaku Fanta underlined:

“We don’t compromise anything in enforcing rules and regulations regarding the payment of tax.”

Recommended