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Curiosity Triggering Top Tax Payer Snubs

Curiosity Triggering Top Tax Payer Snubs

In an effort to encourage honesty and build a culture of pride in paying taxes, the current government introduced an annual top tax payers’ appreciation day last year. About 200 tax payers were recognized this year, although the event did not feature major Chinese, Indian and Turkish giants.  

After handing out appreciation awards at the impressive Sheger Park to loyal tax payers on September 23 2020, Prime Minister Abiy Ahmed (PhD) expressed his hope that the number of top tax payers will grow next year. He vowed that the appreciation will not be limited to crystal trophies and certificates. He pledged to reward loyal tax payers with real gold and platinum. The PM further noted that priority services and premium customer care privileges will be provided across public agencies for top tax payers.

A similar event to appreciate loyal tax payers was organized last year at the National Palace. Back then, 165 companies and individuals received recognition from PM Abiy.

The Ministry of Revenues announced that the awardees are selected on the basis of 12 major criteria. In order to be considered and appreciated as loyal and top tax payer, one has to provide essential tax payment data and disclose the amount of tax and penalty profile of the tax payer. More adds to the list. Differences in audit findings, assessments of tax calculations and tax refunding amounts are considered in order to evaluate the performance of tax payers and come up with a top payers’ list.

There are, however, more stringent criteria to be fulfilled before the companies see their names on the list. Obviously, top tax payers need to refrain from tax evasion and fraud. The requirements demand that they issue receipt for every transaction and not have a record of using bogus receipts. More stringent requirements include clearance from customs related risk factors and neatness of post audit assessments. Another one is that top tax payers must appear seamless during accidental inspection. Information obtained from the Federal Police and Attorney General on the tax payers’ record and behavior is also another factor for selection. Debt repayment history of the tax payers is also weighed in.   

Based on these benchmarks, 200 top tax payers joined the PM at his gala reception this year. Zooming in on the list, one might find some awkwardly missing giants.   

While importers and individual business persons have been recognized, top foreign investment giants are nowhere to be seen. According to the 2020 World Investment Report, China was the largest investor in Ethiopia in 2019, accounting for 60 per cent of newly approved FDI projects, with significant realized investments in manufacturing and services. In addition to China, the largest volume of FDI inflow to Ethiopia comes from Saudi Arabia and Turkey. Very few from these countries have made it to the top tax payers’ list.

For years, mega construction projects have been awarded to Chinese firms, mostly state owned. Yet, Huawei Technologies, East Steel, Dong Fang Spinning and Printing and perhaps a few more made it to this year’s list.  

Why didn’t we see big companies recognized as top tax payers? Why are the huge Chinese, Turkish and Saudi foreign contractors not amply represented in the list when the likes of Salini Impregilo, an Italian contractor, rank second and third top tax payer in the country for consecutive years? In response to these questions, Public Relations Director of the Ministry of Revenues, Ummi Abba Jemmal stated that the criteria set out are the only gauge that determines recognition. She said: ‘the size and number of projects these companies run or the contracts they win do not necessarily matter.’

One more thing unusual about the awarding event is the timing. Normally, in the Ethiopian fiscal year, high level tax payers settle their dues until the early second week of October. For this fiscal year, the last due date is scheduled for October 9, 2020. However, the ceremonious day was held in September. Some argue such practices might not reflect the actual number of tax payers being recognized. But according to Ummi, there are calculations done before hand that help determine how much money will be paid in taxes.

Though FDIs are not considerably recognized as top tax payers, inflows to Ethiopia also contracted in 2019. FDI stood at USD 2.5 billion in 2019 from USD 3.2 billion the previous year. According to the 2020 World Investment Report, FDI was adversely affected by instability in certain parts of the country, including regions with industrial parks. Yet Ethiopia remained the biggest FDI recipient in East Africa.