Tax and its Hype

It’s now the end of the 2017EC fiscal year. Issues on the news and business environment in Ethiopia are about the Tax and Tax collection.

I got a call from one of the local media outlets and was asked to comment on the issues of tax collection. It specifically identified that the federal government spending in the just ended fiscal year was about 1.2 trillion birr. Whereas the revenue collected from Tax is about 900 billion birr. Setting aside other sources of the revenue of the government, there we see a discrepancy of 300million birr.

The GoE complained that the Tax collected is not in par with the expenses by measure of different economic standards. On the budget hearing for the following year, Minister of Finance reaffirmed for the HPRs that 80 percent revenue from Tax in the coming year is a question of ‘life and death’; in his own words.

However, I urge the minister in particular and the government in general that they need to see what the three important factors in this regard are.  

1.       Awareness and education on tax and tax issues

2.       System and structure in tax Collection and

3.       Fighting Corruption

Awareness raising and education: we are still in need of tax awareness and tax education. This includes works that enable to improve identification of tax issues/types, proper documentation, declaration and communication with the tax collecting body. Though tax sector reform program has brought about many changes, there are still more issues that need attention in terms of awareness raising and education.

Efficiency in the System and structure is all about the process of facilitating tax collection enabling effective and efficient use of the knowledge, experience and time of the taxpayer. In this regard the online declaration system and other developments have been contributing a lot. Nevertheless, continuous improvement in the system and structure, including addressing the issues of the sluggish network system should also be the assignment that should not be for granted.

The issue of corruption is quite sensitive as it is a reflection of a number of factors. On one hand the corruption is associated with the lower income of the public servants who are under economic stress to fulfil basic needs given the ever-increasing living cost and inflation. On the other hand, it became the attitude of theft developed in ret seeking public mentality demonstrated by public officials and units. Hence, addressing such complicated challenge needs critical review of the source of the problem.

I am sure about one important factor though. For the government to ensure collection of decent tax, it should convince people of the projects that are to the interest of the public economically. Then the social and security interest of the public comes. Hence, I am bold to say that priorities of the government aligned with the priorities of the public ensure higher revenue in Tax.