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BusinessContraband continues to affect tax system

Contraband continues to affect tax system

Mercato leads in both tax contribution, evasion

The Ethiopian Revenues and Customs Authority (ERCA) told the House of People’s Representatives on Tuesday that it is having a hard time keeping up with the growing contraband trade in Ethiopia as the contrabandists constantly alter their methods and contraband networks evading the existing anti-contraband operations and controlling mechanisms.

Abraham Negussie, acting director of ERCA, while presenting the authority’s nine-month performance report before the House, said that in terms of revenue collection the tax authority has managed to achieve 91 percent of its target or 94.8 billion birr during the period in question. The authority’s target for the period was nothing less than 104.6 billion birr which was missed by 13 billion birr. However, the authority also points out that the performance during the first nine-month was 11.02 percent higher than what was collected during the previous year.

According to the acting head, during the past nine months, a sum of 94.80 billion birr went to government’s treasury which the authority collected from domestic taxes, export duties and taxes, non-tax revenues and revenue from lottery.

However, Abraham pointed out that contraband trade still remains to be one of the major challenges deterring overall improvements in the tax collection system.

In his report, the acting head also indicated that during the past nine months, the authority has seized contraband items worth 495.18 million.

A good part of this (goods worth 450.38 million birr) was seized while being smuggled in to the country or being distributed in the local market. On the other hand, goods valued at 45.80 million birr were seized while leaving the nations via Ethiopia’s porous borders with its neighbors.

Comparing the values of contraband items which were seized by the authority this year and the previous year, this year’s figures are higher by 189.06 million birr or 61.8 percent.

Following his report, Abraham was questioned by MPs as to why the authority has not been able to deter the growing role of contrabandists; if not fully control.

“We are working day and night to control the contrabandists’ movements. The Anti-Contraband Task Force is maximizing its effort from time to time. However, the contrabandists’ are changing their tactics and strategies,” Abraham said.

He further explained that the contrabandists keep looking for several entry points across the wider border areas that Ethiopia shares with its neighboring countries which he said makes the anti-contraband controlling activities quite difficult.

“Since the past few years, road infrastructure has been expanded in most rural and remote parts of the nation. This infrastructure has also given contrabandists more alternatives access to these ears. The uncontrolled and mushrooming motorbikes are serving as a major vehicle for the contrabandists,” Abraham said.

 Abrahm has also received questions from the House which were collected from the public. The majority of these questions focused on poor customer handling by the tax authorities and officers in the custom checkpoints. Rent-seeking, unfair tax valuation, corruption as well as lack of good governance and related complaints were some of issues raised by the public.

“Apart from improving our strategy and commitment to ensure the yearly tax collection system, we are equally striving to closes any possible loopholes that might be exploited for rent-seeking and corruption purposes,” he said.

Abraham also told MPS that tax evasion and frauds are also one of the issues that the authority has been dealing with during the reported period. He argued further that Mercato has been the center of the tax collection and supervision for decades. Particularly, it was the leading area in terms of tax revenue collection that was generated in the nine months. In fact, the Addis Ababa City Administration has managed to secure some 15.4 billion birr during the nine months out of which some 14.9 billion is collected from Mercato.

Perplexingly, Mercato is also a leading contributor to the higher rate of incidence of tax frauds and tax evasion charges that authority has instituted so far, he disclosed.

According to him, there are several traders who were arrested from Mercato in the past two months allegedly committing tax evasion by hiding business income and proper income documentations. The authority has taken legal actions against a total of 109 business organizations and 177 individuals most of whom were from Mercato, Abraham said.

Abrham assumed the acting ERCA directorial position following departure of the former Director General, Beker Shale, after the latter was appointed to head a key political post, head of the office of the Oromo People’s Democratic Organization (OPDO).

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