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Citywaivers tax claims on 7,800 businesses

City tax revenue reaches 18.7 bln in Q2

The Addis Ababa City Administration has decided to wipe the slate clean for some 6000 category “C” taxpayers who have been in a protracted tax valuation dispute with the city revenue authority; while dropping the charges against additional 1,780 businesses under its tax jurisdiction.   

The Mayor of Addis Ababa,Takele Uma (Eng.), while launching a citywide taxation campaign on Wednesday, said that his leadership is devoted to govern ona fair and acceptable footing,especially regarding tax matters. According to the mayor, the decision to abandon the overdue tax claims came after seven years of dispute.

Taxpayers have hadissueswith the tax valuation system and the amounts levied on them by City for a number of years; andto that end they have filed a formal complaint to the authorities a number of times. But, for that to takeeffect, it requires complaining taxpayers to deposit 50 percent of the total tax amount levied; which some of them did while significant proportion of businesses said that they could not afford to do so. 

Accordingly, these 7,800 taxpayers were in this process for close to seven years until City decided to start fresh. In fact, 1,800 taxpayers have been formally charged to pay their dues despite their complaints which the City authorities previously found groundless. Takele said that this group of taxpayers will walk free soon. The mayor further said that a new tax appeal commission has been formed to function independently. The prime task of the appeal commission – composed of autonomous experts and representatives of the business community – will be supervising complaints from now on.

ShisemaGebreselassie, Director General of the Addis Ababa Revenues Authority, said that there were 9,000 complaints filed by small tax payers and out of those,6,000 were found to be not in a position to pay. The decision of the City Cabinet, however,was met with some criticism regarding its fairness and transparency. In fact, most of these category “C” taxpayers have been paying taxes based on the estimations methodology employed by tax authority and which has been the source of dispute for many years. Two years ago, a nationwide tax valuation was conducted based on what is called the “perceived daily incomes”. That process, however,was met with public outcry to the extent that Herman Cohen –a veteran US diplomat –criticizedthe government for taxing small and micro traders while exempting (through tax holiday and incentives) the big fishes from paying. The city government plans to undertake valuations for small taxpayers aka category “C” taxpayersevery three years. Previously, the government had commenced such tasks twice: the first being exercised eight years ago.

According to the Ethiopian taxation system, small taxpayers are those whose annual business income isless than 500,000 birr and who are not legally required to hold book of accounts. The calculation of taxation for this group of taxpayers, whom the tax law refersto as category “C”,is done on the basis of something called “the daily estimated income valuation”.

Across Addis Ababa, there are a registered 331,000 taxpayers and out of those 120,000 are classified as higher taxpayers includedin the categories“A” and “B”. According to the tax proclamation, Category “A” tax payers are those individuals or companies that fall within the annual gross income ranges of one million birr and above. Category “B” falls under the income range between 500,000 birr and 0ne million birr.

In related news, the city’s revenues authority has also stated that during the second quarter of the current Ethiopian Fiscal Year, 18.7 billion birr in revenue has been generated from taxes. According to Shisema, the target for the Q2 was set at securing more than 19 billion. The target for set for the fiscal year is41.5 billion birr. Out of that, the revenue to be collected directly from taxation stands at 34.5 billion birr. In the Last fiscal year, 27.5 billion birr was the actual revenue collected from taxes,less than the target which is 31.5 billion birr.