Controversy has erupted at Wolayita Sodo University over the Ministry of Finance & Economic Cooperation's (MoFEC) recent circular that obliges expat lecturers to pay income tax.
Indian lecturers at the University objected to the 35pc tax deductions to their February salaries claiming it breaches their employment agreements. They also added that they are being singled out for taxation as some other public higher learning institutions with expat lecturers, such as Jigjiga University, have not begun applying taxes.
The University has 85 Indian and one Kenyan lecturer currently. It started to collect taxes from lecturers that have passed the two year grace period that allows an exemption, as mentioned in the circular that was distributed to the 47 public universities.
India is one of the 10 countries with whom Ethiopia has signed a Double Taxation Avoidance (DTA) agreement. While it allows expats from China a grace period from taxation for three years, for countries such as India, Turkey, Egypt, Sudan or France, it is two years.
"We received the circular on February 10, 2018, and moved to implement it immediately," said Samuel Urkato, the newly elected president of the University. "We deposited their salary at the regular time, with taxes deducted, but the lecturers demanded the total amount."
He mentioned that the university is having a series of talks with the teachers to come to an understanding, adding that the problem would have been more easily handled had the lectures contracts incorporated the issue of taxation.
"We are discussing with the legal department of the University on the issue of collectable tax from prior salaries," Samuel told Fortune.
Most non-national lecturers come to Ethiopia with a two-year contract subject to renewal given there is consent between the two parties.
Their monthly salaries at the University range from 1,500 dollars to twice that amount. This is while local lecturers of the country earn 100 Br for every credit hour.
Addis Abeba University (AAU) also begun collecting taxes from its non-national staff beginning last November, after receiving a letter from MoFEC.
The University demanded a clarification from the Ministry's legal department following Indian lecturers that disagreed with the taxation after the termination of their initial two-year-old agreement and the signing of a new one, according to Assemahegn Asres, public relation director at the University.
"What matters is whether or not the non-national has earned a salary from an Ethiopian institution for more than two years," reads the response from the legal department of the Ministry.
The effort to collect income tax from expat lecturers around AAU's 10 colleges and 12 institutions was not uniform until the issuance of the circular, according to Assemahegn.
"We are trying to solve the problem without affecting the academic process" Samuel told Fortune.
Semera University has been able to implement the new circular smoothly
It has been different for Jigjiga University. Although Fortune could not reach the University's president, Abdulaziz Ibrahim (PhD), sources there say that the finance department has not received the circular yet and has paid salary for February without deducting any tax.
The tax law makes the finance head and the university's president criminally liable for failing to collect taxes accurately, according to Yohannes W.Gebriel, a tax and commercial laws expert.
"Uncollected taxes from previous salaries must also be collected as the issue of non-retroactivity doesn't apply in circular," he said. "The university which didn't withhold the tax must also pay the penalty and interest rates of uncollected taxes."