27 July 2014

Ethiopia: Improved Tax Revenue Still Falls Short of Targets

The Ethiopian Revenue & Customs Authority (ERCA) has reported collecting 106.6 billion Br in the just ended fiscal year. This indicates a 26.4pc improvement on last year's performance of 84.3 billon Br.

Local and import taxation contributed 59.6 billion Br and 47 billion Br, respectively, the report said. The share of direct and indirect taxes in the local collection was 27.7 billion Br and 31.5 billion Br, respectively.

The share of export Value Added Tax (VAT) was 16.4 billion Br, followed by 15.3 billion Br from customs. Excise and SUR taxes contributed 4.5 billion Br and 8.8 billion Br, respectively.

The Authority's collection from exports tax revenue was 19pc below its target.

The exposure of the sector to tax fraud and the limited follow up from the Authority to collect the taxes were the main reasons causing the ERCA to fall short of its target, said Beker Shale, director general of the ERCA.

The Authority stopped and confiscated livestock, khat, coffee, gold, silver, cereals, vegetables and fruits that were about to be smuggled out, as well as garments, electronics, foods, cigarettes, cosmetics and drugs, which were inbound, according to Beker. These incoming and outgoing goods, all confiscated, as well as other non tax revenues, brought the Authority a total of 1.7 billion Br, according to Beker. The ERCA also fired 132 employees who were said to have been engaged in corrupt practices.

The Authority listed high employee turnover; poor level of cash register machine usage by businesses, especially at the regional level; difficulty to control contraband trade; poor service provision for tax payers and low performance in the collection of overdue taxes, as major challenges faced during the 2013/14 fiscal year.

"The low level of cash register usage by businesses is because of three main reasons: shortage in supply of the machines, shortage of maintenance services and limited knowledge," said Beker.

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