16 December 2012

Ethiopia: Revenue Authority Seeking Independent Network

Frustrated by the poor network service provided by Ethio Telecom, the Ethiopian Revenues & Customs Authority (ERCA) has requested the former to install separate network services. This project looks set to cost the Authority approximately 40 million Br, Fortune has discovered.

Senior officials of the Authority, including Melaku Fenta, director general, and Gebrewahid Gebre giorgis, deputy director, are negotiating with Bruno Duthoit, CEO of Ethio Telecom.

Frustrations arose because the Authority is not able to receive the necessary information for tax collection, such as the data sent from cash register machines to the central server of the ERCA.

The machines issue printed receipts that record the sale of goods and services, including VAT, on a daily basis. This helps the Authority to keep track of actual transaction costs on the day, which previously used to be available only once the payment had been processed, and it also enables them to identify traders who should be included within the VAT scheme.

Since 2010, around 45,367 taxpayers have been using a total of 50,607 machines, nationwide. Out of these, only 16,675 have thus far sent data to the Authority, for the period up to October 2012, according to the ERCA.

This issue is also of concern to taxpayers, who complained that they are not able to renew their licenses on time, because the Authority fails to promptly issue tax clearances, claiming frequent system breakdowns. During several meetings that the Authority held with taxpayers, they argued that the Authority should have its own network set up similar to international organizations, such as the United Nations Economic Commission for Africa (UNECA) and the African Union (AU), in order to facilitate trade.

"Sometimes the network system of the Authority is on and off so frequently, it is like blinking Christmas lights, and we are told to wait until the network is up," a taxpayer who was at the headquarters of the ERCA to effect payment, on Thursday December 8, 2012, told Fortune.

"I usually spend my whole day at the Authority, due to network problems, every time I come," she added.

The poor network problem is also affecting cash register machine suppliers that are obliged to carry out annual examinations and maintenance services, by law. The machine suppliers are not allowed to return the machines to the taxpayers until they have ensured that it has transferred all of their data, for which a reliable connection is necessary.

Because network connections are not available at the supplier's office, where they carry out the annual servicing, however, they are obliged to transport the machines to a location where there is a better connection, simply for the check up, according to a senior official at the ERCA. This in turn has prolonged the time it takes to service the machines.

The Authority is unhappy with cash register suppliers, because thousands of the machines lack annual servicing and hence fail during data transfer. Out of the 3,553 machines that needed to be serviced, only 1,899 machines obtained the service up to the end of October 2012, according to the Authority's data.

This is worrisome for the Authority, as it has made annual servicing a part of the tax clearance process and a prerequisite for trade license renewal, since June 2012. Taxpayers, therefore, will not be able to get their tax clearance, and hence their renewal, without having their cash machines serviced. The law too fines taxpayers as much as 25,000 Br for failing to service their machines annually.

The Authority has identified the areas where the connection is poor in its request to Ethio Telecom.

Officials of Ethio Telecom were not available for comment, however, in spite of repeated efforts to reach them.

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