Performance and prospects of tax collection in ethiopia undp. There is a paradox in the ethiopian tax system in general and in the income tax system in particular. Chapter two will introduce the students to the income tax in ethiopia. The basic components of ethiopian tax reform program. May 2020 salary income tax calculation in ethiopia. A good tax system follows the principles of efficiency, fairness and easy to administer. The revised draft income tax proclamation, drafted by the ministry of finance and economic cooperation mofec and ethiopian revenue and customs authority ecra, proposed a revision of. Public finance and taxation in ethiopia pdf in a moment of dismissive hubris, the ethiopian tax system may be. A study on assessment of tax administration system on category b tax payers, gamo gofa zone, snnpr, ethiopia ato. Taxes, taxation and the tax system taxes,taxation and the tax system prof. Determinants of tax revenue of countries, as measured by tax to gdp ratio, have been the subject of many researches. If the tax on income from employment, instead of being deducted from the salary or wage of the employee, is paid by the employer in whole or in part, the amount so paid shall be added to the. Ethiopian tax system strikes one as random, disorganized, and incoherent in places. Ethiopian current taxtogdp ratio of 11% is far lower than the average for developed tax systems 2535%, developing countries 1825% and even of the subsaharan average 16%.
Types we have compiled here the rates and exemptions on personal income tax or tax on income from employment in ethiopia. The interpretations placed on language by administrators and courts, the simplicity and understandability of tax forms, the competence and completeness of audit, the vigor and impartiality of enforcement, and the promptness and finality of action all influence the amount of revenue collected, the distribution of the tax. History of the postwar ethiopian fiscal system africa portal. Ethiopian tax laws who is required to pay an income tax. Descriptive statistics such as tables and percentages have been used for data analysis. Previous afrotsion construction wins yirgalem integrated agroprocessing. Pdf taxes and tax reform in ethiopia, 19902003 researchgate. Pdf in most developing countries, income inequality tends to worsen during. Numerous and frequentlyupdated resource results are available from this search. This study attempts to estimate tax compliance costs and assess views of taxpayers on aspects of the tax system in ethiopia. Constitution of the federal democratic republic of ethiopia, it is. The vat rate is 15 percent of the value of every taxable transaction by a registered person and all imports of goods and services other than those vat exempted items in ethiopia. In the ethiopian revenue structure, it is only the share of taxes on income whose average contribution has been.
The ethiopian income tax system is schedular in structure and orientation, the computation, assessment and collection of income taxes based on some identified sources of income, like income from employment, income from rental of property and income from business. Schedule a all incomes from employment shall be taxed based on this schedule. Income taxable under the ethiopian income tax proclamation no. The findings of most of the researchers support that the most traditional factors, in conventional literatures. Definitions a value added tax is a modern tax system and broad based. The study is limited on the current of vat administration in ethiopian and compliance risks.
With its strength and weakness in which applies will be generalized. Historical records show that many once power empires or kingdoms that existed in africa had a tax system that supported or enabled these kingdoms to expand. Introduction to ethiopian government accounting and. We are more accustomed to talking if ever about income taxes even then, of specific income taxes, the value added tax, or customs duties than of the ethiopian tax system as a whole.
The new income tax in ethiopia new income tax calculations. Ethiopian taxation system is very important for raising income of the government. In addition to raising revenue, the mor is responsible to protect the society from adverse effects of smuggling. The direct and indirect taxes applicable in ethiopia. In simple terms custom duty is tax tax imposed on goods entering and leaving the country. The principal taxes currently in place are company profit tax, turn over taxvalueadded tax vat, excise tax, customs duty, income tax from employment and income tax from business. Salary income tax calculation in ethiopia, pension, gross. Personal income tax in ethiopia details written by administrator published on 09 march 2009 category. Ethiopian tax accounting download ebook pdf, epub, tuebl. Consistency of the practice with the ethiopian transfer pricing rules. In contrary to sales tax, being in its infancy arena in the history of ethiopian taxing system, the newly introduced value added tax system has a uniform rate of 15 percent on most goods and services without reduced rate lower. System cargo scanning tax system single window valuation system cargo tracking ethiopian customs guide ethiopian revenues and customs authority march 2017. In a moment of dismissive hubris, the ethiopian tax system may be described as a loose. Ethiopian revenue and customs authority erca branches.
The current fiscal system of ethiopia features some departures from the previous systems and striking continuities in the structure and essential elements of fiscal. Carter of northwestern university for their helpful comments and criticism. The position of registered smes in the tax system 8 92 total taxpayer 459621 large taxpayer38807 12 ethiopian tax reform and its impact on smes. It is an important and most significant source of revenue of the government. For example, steve forbes vaulted briefly into the political. Valueadded tax vat or goods and services tax gst as termed in some countries has become a major tax instrument in a large number of countries worldwide. The result of this study revealed that tax awareness was the major problem for voluntary tax compliance attitude and. Taxation in ethiopia1 value added tax tax deduction. Imperial ethiopian government, ethiopiastatistical abstract, addis ababa. Click download or read online button to get ethiopian tax administration book now. The easily earned income must be taxed more than the hard earned money.
They are subjected to presumptive tax, based on a percentage of turnover. This site is like a library, use search box in the widget to get ebook that you want. It replaces the sales tax, have two rates 15% and 0% with exemptions of the tax. Official pdf, 80 pages world bank documents world bank group. The agony of tenants under the traditional tax system of ethiopia is. Determinants of tax revenue of countries, as measured by tax to gdp ratio. The ethiopian economy is still largely on subsistence level, and in spite of some progress made, ethiopia has only taken the very first steps towards economic and social development. Accordingly the income tax proclamation has introduced four kinds of schedules. Vat replaces the old business tax system of commodity and service taxes including the sales tax and the withholding tax.
The mofed at federal level and bofed at regional level leaded the reform undertakings in the government accounting and financial management. The application of ethiopian transfer pricing rules on multinational enterprises. Taxation in ethiopia in ethiopia a company, based on its activities may be required to pat the following taxes. Introducing modern taxation system oct 04, 2012, ethiopian press agencythe ethiopian revenue and customs authority erca announced friday that etax training and implementation for a number of taxpayers is well underway. Ppt taxation of smes in ethiopia powerpoint presentation. Since the jurisprudence of ethiopian taxation is yet to develop fully, this. Direct tax according to proclamation no 28694 any person whose permanent residence is in ethiopian, has to pay tax from the income that he gets within ethiopia or abroad. Fikadu asfaw and associates law office falo on oct 2011 related to taxes and accounting in ethiopia. Ethiopia introduced vat as a replacement to sales tax in the year 2003. Tax on income from employment has 6 bands or groups of rates. Tax payer identification number tin and automation. Click download or read online button to get ethiopian tax accounting book now. Personal income tax in ethiopia ethiopian business portal. Ethiopian customs guide ethiopian revenues and customs authority march 2017.
Ethiopian ministry of revenues mor is the body responsible for collecting revenue from customs duties and domestic taxes. Recent proposals suggested that by reducing marginal tax rates, or by replacing the current federal income tax with a consumptiontype tax, the united states can experience increased work effort, saving, and investment, resulting in faster economic growth. It is therefore worth clarifying the ethiopian tax system and the rationales behind for the business owners through the relevant institutions that have access to and ability to understand. Acknowledgements the customs guide is developed as part of the world bank groups. The ethiopian income tax system follows a scheduler approach as a result income from different sources shall be taxed and treated separately. To find our way around them, some sort of classification is necessary. The zulu empire in southern africa lead by powerful kings such as shaka zulu is a classic example. As of the new budget year, which starts at hamle 2008 e. It seizes and takes legal action on the people and vehicles involved in the act of smuggling while it facilitates the legitimate movement of goods and people. For the social state the progressive income tax is regarded as conforming most closely to the demands of an ideal tax system. The minimum tax rate applied to income from employment is 10 percent while the maximum is 35 percent. The government needs money to maintain law and order in the country.
Reliable information about the coronavirus covid19 is available from the world health organization current situation, international travel. Oclcs webjunction has pulled together information and resources to assist library staff as they consider how to handle coronavirus. Rate of turnover tax is 2% on goods sold locally and 10% on others. A study on assessment of tax administration system on. Ethiopian tax administration download ebook pdf, epub. The accounting and financial management system reforms under this package resulted a change on the fge accounting system that had been in. C the ministry of finance and economic cooperation mofec has announced this new tax proclamation the new income tax proclamation has employees and low earners at its benefiters.
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