Published On  Oct 30,  2011






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Upgraded Category “B” Taxpayers Give Authority a “C”

Tax Authority meeting leaves business-owners with more frustration than answers



No different than the previous meetings the Tax Authority has held with businesses, a meeting with those upgraded from category “C” to “B”, on Tuesday, October 25, 2011, was full of complain and left participants frustrated.

Many had come thinking that this was a session where they would be allowed room to negotiate their placement and work out a better arrangement. To their dismay, what unfolded was an awareness creation on their rights and responsibilities under their new placement. However, it did not stop them from voicing their frustration.

Chaired by Mamo Abdi, advisor to the general director of the Authority, the meeting was attended by 100 taxpayers and business-owners from the Kolfe Keranio district out of the 22,000 citywide whose category has been upgraded. The upgrade came after the Ethiopian Revenues & Customs Authority (ERCA) discarded the income estimation been in use since 1996 based on the declaration of taxpayers.

This was due to the tax assessment conducted by the Authority, following the prevailing notion in the government that many businesses were not fully disclosing their daily revenue. It had hired 1,200 fresh graduates to conduct the assessment last year. The assessment was conducted not by looking at the accounting books, which many of the category “C” taxpayers did not have, but on the type of furniture and equipment in their establishments, to come up with a figure.

Accordingly, those who had been in tax band “C”, the lowest classification by the Authority, previously reserved for those whose revenue is less than 100,000 Br per year, were moved into “B”, a category for those whose annual revenue falls between 100,000 and half a billion Birr.

However, almost all of the taxpayers in attendance did not agree with their classification. Even more prominent was their grievance towards the mechanisms in place to hear their complaint – the Tax Review Committee and the Tax Appellate Committee.

Members of the review committee are appointed and accountable to the ERCA and the Tax Appellate Commission, which is accountable to the Ministry of Justice (MoJ).

All of the business owners who got up to speak during the meeting claimed that they were wrongly categorised in the system, citing what they used to pay and what they are being asked to pay following the upgrade. Although the Tax Review Committee is a place where they could take their dispute, they considered it biased. All the attendees claimed they had gone to the committee, which had found no fault in the Authority’s new tax notice.

“Although the Tax Review Committee had looked at my case, they upheld the notice given to me by the Authority,” said a businessman selling Tej (local honey mead), who went on to claim that he was asked to pay 19,000 Br under the new assessment.

It was a similar story that was being told by all those who got up to make a comment. After hearing complaints of bias in the review committee, only one person had raised their hand when asked if anyone had gone to the Appellate Commission, the next step in pursuit a dispute of tax notice. 

Going for appeal requires a down payment of half of the amount in dispute within 30 days of the decision of the committee. This provision of the income tax law has been major source of contention between the tax payers and authority. It is also considered as an impediment for access to justice by legal experts. 

“Since the amount of money claimed by the authority is disputable, the authority should not demand half of it to go to appeal,” a legal expert who wished to remain anonymous told Fortune. “The authority could make the down payment half of what taxpayer paid the year before the dispute arose.”

Although an assessment and dispute settlement of tax notice occupied bulk of the meeting, cash register machines, which the taxpayers will have to install as a result of their new categorisation, was an issue that saw floor time as well.

Even if they were to accept their upgraded category, they could not afford to buy the machines and should be afforded the chance to buy them on credit, many of the participants said.

“The minimum cost of a machine on the market is 5,000 Br, which is very expensive for me personally,” one of them had stated.

Although the Authority had attempted to have the machines made available through the state owned Merchandise Wholesale Import & Trade Enterprise (MEWIT), it had failed, Mamo admitted.

“We will consider the option again,” he told the indignant participants.

So far the only companies who can import the machines and the software are those authorised by the ERCA. At the end of last year there were 62 different cash register models and six software programmes identified by the Authority, which are provided through nine approved vendors.

At the end of the meeting that went on for six hours with no break, participants were left with more frustration than answers.




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