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Businesses, State Fail to Connect

Meeting promises rare opportunity to dialogue and resolve problems, but falls short
   and leaves even many more confused than before



Despite the challenges we face in the slump in business we now have the prospect of being fined by up to one million Br. If we are exposed to such challenges wouldn’t it be prudent to leave the country and move abroad,” questioned Woldeberhan Gesses, (above), who imports electronic goods from Dubai and China.

A meeting called by the Ministry of Trade (MoT) on Thursday, March 17, to discuss the challenges importers face in the implementation of two recent proclamations by the ministry turned into a forum where importers aired their frustrations about what they call undue pressures being imposed on businesses.

The meeting was hosted by Abdurahman Sheik Mohammed, minister of Trade, and Ahmed Tusa, state minister of Trade. It was also co-chaired by Eyessuswork Zafu, President of the Ethiopian Chamber of Commerce and Sectoral Associations. He was called to the stage from the audience, where he was originally seated, for the consultation with some 500 businessmen.

The proclamations up for discussion were the “Trade Practice and Consumers Protection Proclamation No. 685/2010” and the “Commercial Registration and Business Licensing Proclamation No. 686/2010”, which were designed by the government to curb the price fixing of commodities and regulate businesses’ compliance with the tax regime. They have also earned the ire of a majority of businesspeople present at the meeting.

Among the issues that businesspeople are particularly against, are the penalties for a businessperson who violates Article 8 of the Consumer Trade Practice and Consumers’ Protection Proclamation. The penalty for those found guilty of hoarding or causing artificial inflation could be fined by up to 15pc of a business’ annual income.

In cases where it is impossible to determine the amount of annual income the fine could range from birr 500,000 to Birr 1,000,000 (one million Birr) and with rigorous imprisonment of between five to 15 years. Another issue of contention includes the possible suspension of one’s business licence, for late payment of taxes, for up to a year.

In addition, another source of discontent comes from the lack of cohesion with regards to regulations issued by the Ethiopian Revenues and Customs Authority (ERCA) and the MoT, whereby a regulation passed by the MoT would be overruled by an internal regulation of the ERCA.

In addition to the often contradictory working procedures of ERCA and MoT, businesses are now even more burdened with the prospect of fines of up to one million Birr, one disgruntled importer said.

“Despite the challenges we face in the business slump we now have the prospect of being fined by up to one million Birr. If we are exposed to such challenges, wouldn’t it be prudent to leave the country and move abroad”, questioned Woldeberhan Gessesse, who imports electronic goods from Dubai and China.

The penalties the importers argue are too high for businesses and can cripple businesses indefinitely. “Under the article on hoarding, say if I have stock of an item that the ministry deems it as scarce, and say that I have no buyers because of the elevated prices, are you to telling me that I cannot put the stock in a warehouse and fill my shop with items that could be sold?” one importer asked the minister.

Girum Bekele, who imports consumer items and distributes them through small retailers, mostly street vendors, says he also finds it difficult to tell his clients to present a Tax Identification Number (TIN) and sees flaws in the manner in which the proclamation was presented.

“My issue is regarding the requirement that our customers need to have a TIN number to buy from us. But some of my customers who buy the items I bring to the market are the type that resell on the streets and at Saturday markets,” he stated.

“I wonder if these were factored in when the proclamation was being designed. What I ask is, have there been proper deliberations before it was announced that TIN numbers were mandatory. Shouldn’t one have asked how many have TIN numbers and what is the level of awareness in regards to the importance of TIN numbers”, Girum continued.

Girum considers that unless the government comes up with a mechanism to address customers like this, businesses risk closing. “For our work we pool monies from bank loans and equbs [informal saving associations]. Unless the issue of TIN numbers and other related issues are addressed, our hands are tied we cannot do business, we cannot service bank loans and our employees will be without jobs and go hungry,” warned Girum.

In addition to regulations about hoarding and TIN numbers, a combination of the devaluation of the Ethiopian Birr, pegged at 16.69 against the dollar on March 18, along with a lending cap for banks, has hit importers hard. It is resulting in a decrease in imports and shortages of some imported items.

Measures by the government in recent times, such as the placing of price caps and restrictive legislation, are narrowing the space for businesses to operate and would only leave room for big players in the industry that have ample resources to withstand the pressures, two importers told Fortune.

They argue that to really help the businesses, the government needs to support them and engage in dialogue rather than put penalties and restrictions in place.

Mulugeta, 42, for his part indicated that “the unilateral moves” by the government show what little regard this government has for businesses and it manifests itself in the actions being taken.
“When the devaluation occurred and banks limited loans, it was us that used our own money, sometimes borrowing from relatives from abroad, to access foreign currency to bring commodities to the public. With threats of actions on us for a perceived lack of tax compliance and now competing with the government in providing items to the market I fear that this will break businesses rather than foster compliance,”quipped Mulugeta.

The salvo of criticism was immediately returned by Nuredin Mohammed, director of Trade Registration and Licensing Directorate, who defended the MoT’s track record in terms of holding consultations with businesses by stating that as early as November 2008 the ministry had convened meetings for businesses to comment on the draft proclamation. He also cited other opportunities businesses could have used that included the consultations with Chambers of Commerce while the proclamation was being debated in Parliament.

“With regards to TIN numbers, it is the duty of all citizens to pay taxes. The issue here is to see everyone on equal footing and there cannot be a case where one business pays taxes and another eludes its responsibilities. Paying taxes is an obligation for all citizens,” reminded Nuredin.

Abdurahman also stepped in to point out that the government’s move towards bringing commodities into the market was part of a regulatory move towards combating inflation.

“When we say we will be introducing commodities to the market, we are only talking about two or three items. The government does not have a policy, the intention, nor the programme, to compete with private businesses,” he assured.

Abdurahman, in the interest of saving time, further directed the gathering to limit their comments to addressing problems concerning the implementation of the proclamations rather than entering into debates on the necessity of the proclamations as they are laws enacted by Parliament. To which a steady walk out of the participants ensued leading up to the end of the session.

A much distressed Eyessuswork Zafu for his part attempted to play a reconciliatory role by stressing that the business community needs to organise itself so that it can make sure that it is included in consultations regarding matters affecting it. He also opined that the one million Birr fine did not necessarily apply to businesses across the board but to those large businesses whose transgressions were at par with the fine.




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