Fortune News | Feb 10,2024
As October and November rolled in, so did the tax season, when tax officials and businesses began an annual ritual of testing one another’s patience. However, the tax bureaus were not as crowded, stuffy and inflexible as in previous years, although businesses were as belated in their filings and demanding of their accountants.
The introduction of a digital portal has made things more accessible than before. Tax can be declared and filed online, and taxpayers pay digitally only to receive receipts in email attachments. However, businesses have their representatives visit tax bureaus to get copies of clearance to renew licenses. The majority of taxpayers chose to take advantage of this opportunity at the East Addis Abeba branch of the Ministry of Revenues. Many taxpayers prefer to settle their tax obligations when the deadline is closer, choosing to keep the amount they have to pay as working capital for as long as possible, although this tendency is declining. That collateralised loans from commercial banks have been frozen has not helped matters this year.
At around 10pc, Ethiopia's tax-to-GDP ratio is low even by sub-Saharan Africa standards. The federal government has all the incentives to make the process smooth. It plans to cover around two-third of its spending this year from taxes. The performance over the first quarter of the fiscal year, at 124 billion Br, shows that the goal is unlikely to be met. Under the threat of sanctions, the impact of the COVID-19 pandemic and the devastating consequences of war, tax officials could have done much worse than collecting over 90pc of the target to cover a large portion of the over half a trillion Birr in the federal budget this year.
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