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Published On  Feb 12,  2012
   
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East Shoa Zone Sluggish to Comply with VAT

Less than a third of over one thousand business in the zone comply, so far

 

 

 

The tax authority’s drive to coral as many businesses as exist across the nation has gained little momentum in the eastern part of Addis Abeba. Despite mandatory requirements by the East Shoa Zone Customs & Revenues Bureau that around 1,151 identified businesses in Adama (Nazareth), Dukem, and Bishoftu (Debre Zeit) towns register for value-added tax (VAT) and start using cash registers, only 28.3pc of them have complied as of mid-January 2012.

This is the first time that businesses in Oromia Regional State have been asked to install cash registers and the second time that such a requirement has been placed on regional towns, as part of the government’s plan to expand its tax base across the country.

Five months ago, the government required 700 businesses to install cash registers in Hawassa, 273km from the capital and the seat of Southern Regional State.

The Authority has plans to collect 8.8 billion Br from its Adama Bureau during the 2011/12 fiscal year. If it succeeds, the Bureau’s achievement will make it the third-largest source of revenues, contributing nearly 11pc of the 35.1 billion Br that the Authority collects for the first half of this fiscal year.

The Zone still plans to register more businesses in the region for the second round, although Dukem, Bishoftu, and Adama have been selected for the first time.

The affairs of these three towns, all on the western half of the Addis-Harar Highway 4, used to be handled directly by the Oromia government. Mobilising domestic revenues, nonetheless, falls under the direct mandate of the East Shoa Zone Bureau of the Authority, which oversees 10 weredas.

“When buying cash registers, businesses have to bring in their purchase receipts to the Bureau and fill out the necessary forms in order to be included in the system,” Tesfaye Hailu, manager of the East Shoa Zone  Revenues & Customs Bureau, told Fortune. “VAT-registered businesses that fail to do this will no longer be allowed to operate.”

The businesses that are required to use cash registers were provided with training by the federal tax Authority, the Zone’s Revenues Bureau, and the revenues bureaus of all of the three cities.

Four companies, Ambassel, Omedad, Jupiter, and Payment Business Solution, have been issued permits to sell cash registers and train people in their use. Except for Jupiter, all of the other companies have started selling machines in these three towns.

“We were asked to sell the machines through our Adama branch, starting from December 2011,” Belay Ketema, manager of Omedad’s branch office, told Fortune. “However, we did not have enough stock in our warehouse, so we started selling two weeks late.”

So far, Omedad is the top seller of cash registers in the region, having sold 170 of them, as of two weeks ago. Close to 88pc of these machines were sold to businesses in Adama, which has a population of 271,558, according to 2010 data from the Central Statistical Agency (CSA).

Some VAT-registered businesses in Adama have made slight increases in prices, subsequent to their use of cash registers. A well-known hotel in Adama, for instance, increased the price of some of its food selections, although it has made no changes to its prices of alcoholic drinks. Goat stew (kikil) which used to cost 27 Br at this hotel now sells for 29 Br.

“Now that we are VAT-registered, every transaction is recorded,” the owner told Fortune. “We have to declare VAT for everything we sell; so we need to increase some prices to stay profitable, but we have kept drinks at the same price, only because we do not want to lose customers.”

However, price increases have nothing to do with the newly installed cash registers but, rather, have to do with other factors in the market, other businesses counter.

Still, others are apprehensive about the awareness of use of the cash register machines being low. Some are not clear on some points of the VAT declaration process, either.

“Some government offices buy on credit,” Yared Habtamu, owner of YT Solution Business Enterprise, told Fortune. “I am not clear about whether we are expected to declare VAT for transactions from our own pockets.”

Sufficient training has been given to businesses coming into the tax net, Tesfaye, of the Authority’s Bureau, believes.

“We have taken a long time to implement the system,” he told Fortune. “Businesses that supply goods to government offices should submit their costs and be paid in advance so that they do not have to pay VAT on their own.”

 

By Daniel Kifle
Special to Fortune

 
 
 

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