An audit gap of over 10.7 billion Br was discovered in the accounts of the Ministry of Revenues for the 2016/17 fiscal year.
The seven-page summary audit report shows that 2.6 billion Br was recorded as uncollected tariffs and duties. The rest included false profit notifications by tax payers, uncollected value-added taxes and under utilisation of the allotted capital budget.
Procurements that did not follow proper procedures, exaggerated salaries and benefits, mismanagement of properties and unbalanced annual financial reports within the Ministry departments were pointed out as contributing factors for the audit gap.
The report was presented to the Public Expenditure, Administration & Regulation Standing Committee and representatives from financial institutions, the Public Procurement & Property Disposal Service and Revenues Minister Adanech Abebe were present.
Officials from the Ministry responded to Gemechu Dubisso, Auditor General, stating that there are financial as well as performance gaps that have to be addressed and that they have taken significant measures to narrow the gaps. The Ministry says it has since managed to condense audit gaps by 2.2 billion Br in the past two fiscal years.
The Auditor General recommended better technology utilisation to the nation's tax and customs ministry to address recurrent audit gaps.
The Ministry plans to collect 213.9 billion Br from taxes this year, planning to cover over two-thirds of the federal government's 346.9 billion Br budget.
A number of reforms have taken place to revamp tax collection in Ethiopia, including raising the mandate of the tax authority to that of a ministry. One of the most recent was the formation of a task force led by Eyob Tekalign (PhD), state minister for Finance. It was formed upon the recommendation of the Macroeconomic Committee, under the Prime Minister's Office, to improve tax collection with a focus on overhauling investment incentives.
The Auditor General concluded the meeting by acknowledging measures taken by both institutions but stressing that inappropriate expenses and uncollected revenues related to allowances, transport fees and overtime payments should be addressed.
Gemechu also recommended the revision of laws that allow tax-related relief to be given.
Last month, Deputy Mayor Takele Uma filed a tax relief request with the Attorney General's Office for 1,780 taxpayers accused of tax evasion. The Office of the Attorney General accepted the request and dropped the charges. The City Administration also dropped cases of tax valuation disputes for 6,000 category "C" taxpayers.
"The Ministry has to work on modernising the tax administration system to be ahead of tax violators that are up-to-date with technology," Gemechu said.
Yohannes Woldegebriel, a lawyer who specialises in tax law and the commercial code, believes that the audit gaps are outcomes of inadequate financial and performance management of the previous Ethiopian Revenues & Customs Authority.
"There has been a major human resource gap at the institution, making it hard to deal with the complicated job of tax administration," he said. "The audit gaps are the fruits of this."