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City administration waives 4.5 bln birr in taxes

City administration waives 4.5 bln birr in taxes

In order to help businesses withstand the growing impacts of COVID-19, the Addis Ababa City Administration has decided to waive some 4.5 billion birr in interests and penalties on unpaid tax, accumulated since 2005, benefiting some 7,800 taxpayers in the capital, The Reporter has learnt.

According to Shisema Gebreselassie, director of the Addis Ababa Revenues Bureau, not only will the interests and penalties waiver allow 7,800 taxpayers survive the shock the pandemic has caused, but its indirect benefits are also estimated to resonate across 340,000 businesses and individual taxpayers of the city in the form of job protection and the risk to the supply chain.

Although the waiver extends to tax cases between 2005 and 2019, pending files between 20016 and 2019 are the biggest beneficiaries since they will be able to shade back payments amounting to 3.4 billion birr. On the other hand, the waiver for those between 2005 and 2019 is estimated to be around 1.1 billion birr, one-third of the most recent cases.            

However, even the principal amounts will be paid on an installment basis, once 25 percent of the overdue is paid up-front. The remainder is set to be paid over a one year period. Accordingly, those businesses that can afford to pay 25 percent of the principal of the unpaid taxes they owe at once will have a 10 percent discount. The decision of the City Cabinet also includes a 50-percent waiver on income taxes for a time period of four months, which they will use to sustain jobs and their business.

Until 2005, some 2,800 taxpayers had been out of business and the city tax authority has overtaken and seized their properties. Out of those, some 600 taxpayers, who have remained in the shadows since they were assessed for taxes, have come out to report that they want to pay the overdue principal as the penalties and interest rate charges have been dropped to ease tax burdens.

During the 10 months of the current fiscal year, some 31 billion birr out of the planned 32.5 billion was collected successfully, according to director. That was attributed to the new campaign such as rental tax campaign, in which some 55,000 individuals, who otherwise did not pay, are now in the tax payment system.

In addition to that, 15,000 individual businesses which did not have trade licenses have been identified and brought to the formal channels, so that the tax base could expand and achieve its target set for the year.

Similar to the recent announcement by the Ministry of Finance and the Ministry of Revenues, the city’s tax authority will follow an installment procedure, where accrued taxes will be paid within in a one year period, with an initial 25 percent payable upfront.

It is to be recalled that the federal government has waived some 78 billion birr worth of unpaid taxes as part of the COVID-19 stimulus package.