23 December 2012

Ethiopia: House Ratifies Double Taxation, Fiscal Evasion Agreements

The House of People's Representatives ratified double taxation and fiscal evasion agreements, with the governments of the United Kingdom (UK) and the Seychelles, during its seventh session, held on Tuesday, December 18, 2012.

The agreement with the UK was signed in June 2011, when the then deputy prime minister and foreign minister, Hailemariam Dessalegn, visited London for the UK-Ethiopia Investment Forum. The taxes to be considered include; the UK's income, corporation and capital gains taxes, and Ethiopia's income and profit taxes; alongside tax on income from mining, petroleum and agricultural activities.

In the case of the Seychelles, taxes to be considered include; business tax, income and monetary benefits tax, and petroleum income tax. Ethiopia will also consider income and profit tax, and tax on income from mining, petroleum and agricultural activities.

The agreements will eliminate the double taxation of income or gains arising in one country and being paid to residents of another country. Taxing rights will be allocated to the governments of the two countries to facilitate the process. The countries will also avoid discrimination in tax treatment.

"The UK welcomes the approval by the Ethiopian government, since the two countries have a strong bilateral relationship," Greg Dorey, ambassador of the UK to Ethiopia, told Fortune.

The agreement will strengthen relations between the two countries, by providing tax stability to the residents of the UK and Ethiopia, according to Dorey. Mutual economic cooperation, as well as the flow of investment, technology and services, will also be facilitated, he added.

The UK has one of the largest double tax treaty networks in the world, having negotiated agreements with more than 100 countries. In addition to Ethiopia, the UK has entered into treaties with a further 17 African countries, which includes;Sudan, Uganda, Ghana and South Africa.

"By providing tax certainty the agreement encourages cross-boundary economic activity and thus promotes trade and investment between the two countries," the ambassador explained. "It also serves an Exchequer protection role, by including provisions to combat tax avoidance and evasion, and partly by measures providing for the exchange of information between revenue authorities."

Ethiopia had such an agreement with the UK during the military regime, which fell in 1991, according to Wanna Wake, the chairperson of budget and finance standing committee at the parliament.

For 20 years, until 2011, the investment flow fromUKto Africa was only 50.2 billion dollars, 731 million dollars of which was towardsEthiopia.

Bilateral trade relations between the UK and Ethiopia reached 291 million dollars in the 2011/12 fiscal year.Ethiopia's export to the UK has grown on average by 10pc, from 53 million dollars to 66 million dollars. On the other hand Ethiopia's import from UK has grown by 22pc, and has now reached 225 million dollars.

In comparison, economic relations between the Seychelles and Ethiopia are minimal, but Ethiopian Airlines has recently commenced a daily flight to the island country.

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