Tax Dispute Dampens Awash's Milestone Profit Thrill

Nov 25 , 2023.

Awash International Bank (AIB) posted a striking surge in net profits, reaching 6.9 billion Br this year, a milestone announcement made by its Chairman, Gure Kumssa, at the shareholders' meeting on Saturday. The celebration, however, was dampened by a contentious tax dispute that has emerged as a considerable concern for the Bank and its shareholders. The Bank's robust financial performance was revealed at a meeting held at the Skylight Hotel on Africa Avenue (Bole Road), demonstrating a substantial increase in net gains. However, the festive air was overshadowed by a looming legal challenge from federal tax authorities. AIB is embroiled in a dispute over the tax treatment of shareholders' retained earnings used to finance subscribed capital.

The controversy reached a critical point with AIB's appeal to the Federal Tax Appellate Commission. The legal quagmire derived from a Federal Supreme Court ruling that earnings used to pay subscribed capital should be subject to dividend tax. The ruling mandated that back taxes, including interest and penalties, be levied on previously untaxed earnings. It has rattled the financial sector, with observers predicting a potential standoff between Ethiopian banks and tax authorities.

Despite the legal hurdles, AIB reported a strong operational year. The Bank saw a 17pc increase in foreign exchange earnings, amounting to 1.46 billion dollars, and a 44pc growth in total assets, reaching 224.02 billion Br. Notably, the Bank has successfully reduced its non-performing loans (NPL) to under one percent, a key factor in its profit growth. AIB's performance has been remarkable, more than doubling its profits from the previous year and overshadowing competitors like Dashen and Abyssinia banks. The Bank's aggressive expansion strategy, marked by substantial growth in its branch network and a workforce exceeding 20,055, has significantly contributed to its success. However, the Bank's Earnings Per Share (EPS) saw a slight increase of a mere 1.2pc, from 570 Br posted the previous year. AIB maintained the highest EPS among private banks.

PUBLISHED ON Nov 25,2023 [ VOL 24 , NO 1230]