He says businesses can put in complaints to the Bureau for corrections if the number of employees and their salaries fall outside of set ranges.

The Federal Tax Administration Proclamation empowers tax authorities to conduct price studies on taxpayers, which can be used to assess taxes and identify tax concealment.

Sewnet stated that some restaurants pay butchers 30,000 Br to 40,000 Br but under-report it as 1,000 Br to 2,000 Br.

Sewenet also disclosed that the Bureau is planning to implement minimum thresholds for rentals and other employee tax filings outside of the hospitality and garment industry. They have begun estimating the value of rented houses based on their location and market value to ensure correct tax application.

The Bureau's study indicates that 64pc of the approximate total of 123,000 Category A and B taxpayers either do not pay any payroll tax or under-report it. The study also revealed that 44pc of private limited company employees were reported to not be paying any payroll tax, with businesses claiming that they did not have any employees. This directive does not include Category C employers and employees, who have an annual gross profit of less than 500,000 Br.

Ayalew Ahmed, communication head of the Confederation of Ethiopian Trade Unions (CETU), believes that the standard indirectly sets minimum wage rates, even though the Bureau denies it. “The set wages are still not sufficient for employees to earn livelihoods,” he said.

The Bureau targets to collect 230.4 billion Br from taxes in the 2024/25 fiscal year. It has collected 75.42 billion Br in the first five months.

Sewenet disclosed that the wage standards will be applied in all industries beginning next month.

Yohannes Woldegebriel, director of the Addis Ababa Chamber of Commerce & Sectoral Associations Arbitration Institute (AACCSA Al), criticised the wage and headcount standard stating it lacks a rational basis. He argued that income tax is levied through self-declaration by the employer and that this new regulation defies this principle.

Kaleb Wendu, a tax law lecturer at Dilla University, also agrees that the new standard defies many principles of legal certainty, a principle that demands the law to be clear, precise, and unambiguous. He says this principle is fundamental to the rule of law. He believes the principle of certainty will be undermined because the standard is thought to be arbitrarily made without consulting the concerned parties.

Kaleb fears the standard could encourage informal employment and might reduce the allowances and incentives that workers receive from their employers. He stated that the standard informally sets a minimum wage rate, a mandate the Bureau does not have. The new regulation contradicts contract law, which is solely between employers and employees, representing a third-party interference, according to him.

Abdurazak Nesro, a legal consultant, argues that the Bureau's mandate, as defined by the Proclamation for the Reestablishment of the Executive Organs of the Addis Abeba City Administration, does not authorize such actions.

He argues the law limits the Bureau's authority to reporting and determining taxes, not issuing standards to collect them. Because the standard also includes the number of employees in addition to their salary, Abdurazak believes that it interferes with the autonomy of the companies.

PUBLISHED ON Dec 22,2024 [ VOL 25 , NO 1286]

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