Sunday, September 24, 2023
BusinessCity admin to rake in 6 b br from walls and roofs...

City admin to rake in 6 b br from walls and roofs but property tax waits in wings

Addis Ababa’s rooftops could yield a bonanza for City Hall – if officials succeed in raking in up to six billion birr annually from a revamped wall and roof tax, a tenfold increase over current revenues.

The administration aims to cover some subsidy expenses with the massive influx of cash from the new tax plan targeting homeowners across the capital city.

The proposed wall and roof tax would be separate from a proposed landmark property tax in the works by the Finance Ministry – set to be the first of its kind in Ethiopia.

The taxation push comes as the city administration seeks to generate more revenue to fund infrastructure projects and amenities. At the heart of the new wall and roof tax is the notion that homeowners benefit from public services and should therefore contribute.

The tax, first introduced 45 years ago under the former military regime, has been revived with revised rates. The current rates range from less than a birr to 5,000 birr annually.

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Under the new directive, rates now vary from 146 birr to 444 birr per square meter, categorized based on building type – residential condos, commercial properties, wooden structures and mud houses. Each category also has up to four sub-categories.

To calculate the tax owed, the new rate is multiplied by the total area of the property and then multiplied by 12 months.

However, as an olive branch, residential property owners will only pay fifty percent of the total tax owed this season. Commercial building owners will pay seventy five percent. But starting next fiscal year, owners must pay the full amount, city officials say.

Of the city’s 1.2 million buildings, only 891,000 are eligible for the decades-old “wall and roof tax,” yet only 182,842 actually pay the tax. Over 90 percent pay between one and 500 birr annually.

However, after an aggressive implementation drive in recent months, the tax roll has swelled by 91,000 properties – largely condominiums, Mayor Adanech Abiebie said.

Previously, the city collected just 600 million birr per year from the tax.

“This is very unfair,” Adanech said, implying current rates were too low.

But city dwellers are concerned about the revised rates, which Mayor Adanech claims remain low.

With the new system, the city tax bureau expects to collect up to 6 billion birr annually from the wall and roof tax alone, according to Adem Nuur, bureau head. “This is separate from a proposed new property tax still in the works.”

Mayor Adanech claims the new wall and roof tax revenues will subsidize expenses like the 7 billion birr the city allocates annually – including 2.5 billion for school meals, 2 billion for items like Sheger bread at reduced rates, and 1.9 billion for transport and fuel subsidies.

But experts warn the substantial tax hikes, along with other revisions, could severely impact residents’ incomes. Commercial buildings are already doubling rents due to their wall and roof tax bills, fueling price increases. Experts also caution the tax poses a corruption risk from the start.

“We are studying exemptions for pensioners and low-income residents,” Adanech said, claiming officials demanding false high rates from homeowners are being fired.

Some city staff have demanded rates five times above the new figures, Adem of the tax bureau said.

“Homeowners benefit from services funded by taxes, so they must contribute,” the official argued.

Government and NGO structures are exempt, but residential and commercial condos as well as wood and mud homes pay – facing five percent penalties for late payment.

“We’re counting newly built and under-construction units, including condos,” Adem said, adding few owners had paid before while most didn’t pay at all.

“The previous rate was less than one birr. We increased it now,” he continued.

Addis Ababa could generate over 200 billion birr in taxes annually but collects less than half that currently, according to official figures.

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