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The Federal Government has failed to achieve the
20.8 billion Br it had planned to collect in the
form of taxes over the past 10 months of the fiscal
year by 4.4 billion Br. The year-end target stands
at 26.3 billion Br.
This deficit in tax yield was of major concern to
Sufian Ahmed, minister of Finance and Economic
Development (MoFED), when he presented the 53.2
billion Br budget proposal to Parliament on June 10,
2008 for the 2008/09 fiscal year.
“To increase the revenue from this source, the
government has undertaken various reform activities
but the effort couldn’t bring the desired outcome,”
he said.
Ethiopia’s tax collection performance is much lower
than even the Sub Sahara African average. The share
of revenue generated from various forms of direct
and indirect taxes to the Gross Domestic Product
(GDP) of Ethiopia was 12.8pc in 2007, while Africa’s
average stood at 23.4pc, according to the latest
regional economic outlook for Africa released by the
International Monetary Fund (IMF).
In the first half of the current fiscal year, the
Federal Government collected 9.7 billion Br,
according to the Ministry of Revenues. The amount
grew to 16.4 billion Br in the following four
months.
Dereje Debebe, MP-UEDP-Medhen, believes that the
country would not have sustained a budget shortfall
had the government met its target.
“There would not have been an issue of a deficit”,
he said.
The country has run on a 2.3 Billion Br budget
dearth in the past 10 months, forcing the government
into domestic borrowing of 1.3 million Br from
banks, while the balance was sourced from foreign
financing.
This deficit will certainly have ramifications on
the proposed budget bill for the next federal budget
year, which has been increased by over 10 billion Br
from the current one.
Sufian identified three reasons for the total tax
collection from domestic sources failing to reach
the target.
The Finance minister listed the duty-free import
allowed by the government as the main factor in the
reduction of the revenue. Under invoicing and
maladministration at the customs authority were the
two other reasons he stated as contributing to this
failure.
In light of this repeated letdown in meeting the
targeted tax revenue mark, government has begun the
establishment a new agency, the Ethiopian Revenues
and Customs Authority. This would be the result of a
merger of the present Ethiopian Customs Authority,
Federal Inland Revenue Authority, and the Ministry
of Revenue in to a single authority.
Sufian is upbeat on next year’s performance though.
He told parliament that the government expects a
28.8pc rise in taxation returns from that of the
current fiscal year.
To achieve this target, the main sources of revenue
would be Surtax and Excise taxes, while VAT would
generate even higher income for the Federal
Government. |
