Businesses that are registered in Tigray region as a federal taxpayer but are currently located outside the region will be paying their taxes at the Northwest Branch of the Ministry of Revenue in Addis Ababa.
The federal revenue that should have been collected in the region will be collected directly by the ministry. The tax that should have been collected by the regional government will be deposited in a trust bank account.
The ministries of finance and revenue are implementing this temporary procedure because organizations and individuals registered as taxpayers in Tigray are having a difficulty to continue their business activities in other parts of the country, according to Abaynesh Abate, the ministry’s tax declaration director.
Despite their desire to continue working in their current location, the taxpayers were unable to renew their business licenses, vehicles or construction equipment.
Abaynesh said that they could not obtain loans, bid on contracts or receive other government services. “Some of them even claimed that the house they rented for their business was in trouble since their business license had not been renewed.”
More than 100 complaints from Tigray’s taxpayers have been lodged to the ministry, and the number continues to grow. The majority are taxpayers who must pay taxes to the regional government.
Abaynesh says among the complainants, ten are Tigray registered firms that are managed by Commercial Nominees and pay federal taxes.
She explained that after the ministry informed the Ministry of Finance about the complaint in April, it allowed taxpayers to get a temporary tax clearance through a temporary procedure or register as taxpayers elsewhere.
In a letter written by the Ministry of Finance to the Ministry of Revenue last month, it acknowledged the regional government’s authority to collect the tax revenue in Tigray region.
The minister cited Article 96 of the Constitution to explain saying, “Since the income collected from individual businessmen and regional public enterprises is a regional income, it is clear that it is the regional government that can levy and collect tax.”
On the other hand, the letter explains that the tax collected from private organizations located in the region is the joint income of the federal and state governments, levied and collected by the federal government. But the income collected from federal public enterprises located in the region is the income of the federal government.
Nevertheless, since both taxpayers registered in Tigray are facing difficulties to conduct their activities due to the “emerging security problem,” State Minister, Eyob Tekalegn, in a letter stated that it is necessary to establish a temporary system.
The Ministry of Revenue, which has designated the North West branch in Addis Ababa’s Lideta neighborhood, will ensure that these taxpayers receive their tax clearance.
Abaynesh added that a request has been made to the Ministry of Finance to open a trust bank account where regional taxpayer revenue will be put.
“It will be held in a trust for later transfer to the region,” she explained.
According to Abaynesh, the ministry would only collect the taxes submitted by taxpayers because there is no means to check how much the region’s taxpayers owe.
“We don’t have any information to show how much they should be paying at that point. When the situation in the region stabilizes, it will be thoroughly examined” Abaynesh elaborated.
If taxpayers want to shift their workplace to their current address after receiving their tax clearance, registrations will be completed at the preferred address.
Under typical circumstances, changing a company’s address requires amending the company’s establishment document and submitting meeting minutes. Providing permission to change address is the authority of the regional government. All these requirements are not necessary expected to be meet in the temporary procedure.
However, even though both federal and state taxpayers registered in the state will be issued a tax clearance certificate from the Ministry of Revenue, they cannot sell their property. According to the Ministry of Finance’s letter, it is impossible to verify whether they have tax debt or not in the current situation.