Remember Reverend Jessie Jackson crying live on TV the night Barak Obama was sworn in as the 44th and first unprecedented black president of the United States?
 

Humour had it at the time that the civil rights movement politician had tears on his face more because he would be one of those Americans whose annual income exceeds 250,000 dollars, an income group Obama campaigned needed to be taxed more.
 

The issue of tax is indeed at the heart of any political life of a nation; it turns to be a battleground where the political system allows a competitive electoral contest. Candidates rally behind tax issues with almost all promising to cut tax. No politician dares to tinker with tax come elections close.

Recall George Bush's (Senior) famous sound bite in 1988, when he accepted nomination as the Republican's presidential candidate?
 

"Read my lips," said the former president of the United States, pointing his finger at his moving lips. "No new taxes."
 

Although it was believed the statement led to his being elected as the 41st American president, George H. W. Bush did not live up to his promise; two years after he became president, Bush incorporated several forms of taxes in the 1990 budget agreement, in order to reduce the deficit in the federal budget. 
 

Raising tax is one instrument states employ in their bid to abate budget deficits. Ethiopia's case is no different, although successive governments have a history of fiscal discipline, including the administration of the Revolutionary Democrats. The federal budget deficit since 2004 - the year when Ethiopia's economic structural transformation is believed to have begun - has not been that bad, and it is declining. It dropped from negative 2.4pc of the GDP in 2004 to negative 1.5pc this year, although there was an average three per cent in the years between.
 

What is striking is that the deficit amount declined at the same time when domestic debt by the state also slid from 29.1pc of the GDP in 2004 to 24pc in 2009; and external debt slashed from 54pc five years ago to a surprising 17.6pc in 2009. Credit perhaps goes to the west's debt forgiveness through the Heavily Indebted Poor Countries (HIPC).
 

Yet, the federal budget has increased exponentially, to a record high of 53.4 billion Br for 2008/09; it seems ambitious, if not bizzare, for the administration to promise to keep the federal budget deficit at zero. The administration is determined to finance its expenditure - although declining from 20.7pc of the GDP three years ago to 17.9pc in 2007/08 - largely from domestic revenues.
 

It banks on its ability to raise 30 billion Br through direct and indirect taxes, almost 10 billon Br more than what the Revenues and Customs Authority (FRCA) collected last year. It is an enormous challenge, indeed. Whether or not Monsieur Melaku Fenta, director general of the authority, will succeed will be obvious soon. But there is no doubt that the taxman is roaring like a lion with sharp teeth, claiming what is due to the state, although disputes are rife here and there about discrepancies in computing between what his agency claims and what businesses admit. The authorities still argue there is a well-lubricated appeal mechanism to resolve such disputes.
 

Officials at the authority also argue that their aggressive drive in collecting tax and enforcing the law now is simply a coincidence; it has little to do with the effort in keeping on target for the fiscal year. It happened after the tax agency passed through institutional and structural transformation that resulted in two agencies being lumped into one. It just happened to be at a culmination of a three-year reform program, including the automation projects at the customs and revenues agencies, they would argue. They say they are now "in full gear" doing their job, after finalizing preparation and organizational tasks.
 

They could be right. Nevertheless, they could not have picked a worse time than now to do so, when their party is up for electoral challenge a year from next month.
 

Interestingly, if there is anything that the Revolutionary Democrats are not, it is populist. This is, in fact, their trait considered as political stubbornness, as damaging as it may get. They probably will go down in history as a group of idealists who would not hesitate to pay the price for daring to pick up issues that are too sacred to the collective psyche of the nation for it to be challenged. Nonetheless, they have been doing it all along; for right or wrong.
 

This includes political issues from redrawing the political map of Ethiopia - from highly centralized state to federalist system demarcated on linguistic based cultural identity - as well as their ill-fated attempt to resolve Eritrea's issue by letting it go, and its regrettable concession of an outlet to the sea as a consequence. Yet, it did not stop Eritrea from remaining a big hole in contemporary Ethiopia's state of affair. These were some of the issues that have not only cost them electoral votes now and then. They are too forceful and deep in putting them at seemingly eternal loggerheads with a considerable size of the populace, particularly the urbanities.

Here they are again, a year from national elections when their candidates will soon bow to the voting public in a bid to win votes, picking a daring fight with the business community. It would serve little purpose for an incumbent party in a run-up to an electoral challenge to select this period to demand taxes allegedly due to the state, and send a strong signal that its tax laws are strictly observed by the business community.

The taxman, indeed, appears to be taken seriously that this time around he means business. The authority is now claiming hundreds of millions of Birr in tax arrears for the three years since 2006 from close to 1,000 companies that are in the group of large taxpayers. They may be very small in size, constituting the fraction of the 600,000 registered taxpayers. The state has a point if it thinks these are companies with the ability to pay, and granted privileges in tax holidays and enjoyed duty free imports. But they are also potent, vocal and could raise their voice loud enough to cause popular discontent.

Before this turmoil subsided, Monsieur Melaku's men were out in the field, again, making a series of arrests in 47 companies that were allegedly found dodging value added tax (VAT). It is up to the courts to establish their guilt, if at all there has been any. But this does not mean there has not been the practice of VAT dodging; it was rampant. Unlike in the past, when several people rallied against the comprehensive manner of tax imposition, this time around, VAT has become a very divisive issue within the business community.

When the government introduced VAT in December 2005 of 15pc on sales, it was against the backdrop of a 15pc sales tax applied for many years. Alas, many companies were in the habit of not collecting at all; if there were any which did, they had seemed to be little aware that they were doing it on the state's behalf, thus had to transfer their collections to the national treasury. Neither the state, nor the citizenry, were serious about it. There was simply a different mindset then.
 

The government launched the new system with a pilot project on 5,000 registered companies. At the beginning, it had seemed very tough, prosecuting those whom it accused were unable to comply. Brehane Mewa, former president of the national and metropolitan chambers, went into exile after he was accused of VAT dodging. Several were jailed and convicted, although many of them were granted pardon later on, during the millennium hype.
 

This demonstration of toughness helped the government to some extent; its collection of revenues from VAT grew by an average of 20pc over the past four years to constitute a substantial part of the whole tax revenues business. This year, government collected six billion Birr from 32,000 VAT registered businesses.
 

But not all businesses registered to collect VAT were complying with the law. In fact, many businesses defied it openly, and for far too long. And tax authorities did little to stop the widespread practice, although there could have been ad hoc and sporadic efforts to fight it.

Sadly, the business of VAT became divisive in the business community because those who breached the law began to use it as an instrument of competition. Businesses determined to abide by the law were punished for their good conduct; they were not able to compete without violating the law. There was no state agency to protect them, stopping the culprits from their unlawful conducts.
 

If there was anything that protected them, it was the dynamics in the economy. A chronic shortage of supply finally leads buyers to worry about the availability of the goods they want, than the 15pc they could have saved. In times of shortage, the businesses that comply with VAT made their money.
 

There is now a debate why businesses were tempted to dodge VAT. Some perhaps underestimated the consequences of their act; others were afraid that they could be wiped out of the market; or a few might have felt that it was alright for what thy neighbour does could not be bad. However, there were several businesses that acted in impunity, thinking that avoiding issuing VAT receipts would help them conceal the actual amount of their turnover. This would help them avoid paying a lot more in corporate tax.

It is clear that lack of uniform and consistent enforcement by the state led to market distortions that rewarded the outlaws and penalized the law-fearing businesses. If the taxman wants to act in a firm manner now, in enforcing the law, it is only a belated move. It will be more disappointing if this will remain an act that is campaign-like and the authorities falter down the road, once again, when the political temperature rises and the incumbent begins to feel the heat.