Chapter Eleven Tax Administration

Tax administration Systematic organization and arrangements to assess and collect taxes from taxpayers Tax administration has: Management system Tax Laws or Codes Knowledgeable Administrator

Requirements for an efficient and effective tax administration Simplification of the Tax Procedures Establishment of separate units for tax reforms Provision of training to employees Development of a good accounting system Monitoring closely the behavior of taxpayers Provisions of relief to industries facing difficulty

Requirments- cont'd Viewing taxpayers more as a clients than as enemies Encouraging self assessment Educating taxpayers Decentralizations of tax Administration Encouraging Tax Withholding and Record Keeping

Tax administration Structure in Ethiopia Federal tax collecting body, ERCA constitute Ethiopian Customs Authority, National Lottery Administration and Inland Revenue Authority (Federal or Regional). Federal Inland Revenue Authority and Bureaus of Regional Tax Authorities collect all the direct taxes and three indirect taxes (Value Added Tax, Turnover Tax and Excise Tax). The Ethiopian Customs Authority is responsible for Collecting Customs Duty, Excise Tax, Value Added Tax and Withholding Tax on imported goods

Revenue sharing b/n Federal Government and Regions According to FDRE constitution, the FDRE comprises of a federal/central government, nine member national regional self-government and two city administrations. Each of the organs has their respective legislative, executive and judicial powers. Accordingly, both the federal government and each of the state governments are empowered to levy and collect taxes (revenues) within their own spheres.

Reven ue sharing- c0nt'd The FDRE constitution divides the power of taxation into four categories, namely: Federal power of taxation State power of taxation Concurrent power of taxation and Undesignated power of taxation.

Federal (Central) power of taxation It is the exclusive power of the federal government of Ethiopia to levy and collect the following types of taxes through the Ethiopian Revenue and Customs Authority: Duties and taxes on foreign trade Employment income tax from employees of the federal government and international organizations Tax on enterprises owned by the federal government. Taxes on game of chances Taxes on income of air, rail (train) and sea (marine), transport services. Federal stamp duties and, Fees and charges relating to licenses issued by organs of the federal government.

State (regional or National) power taxations The following are separate list of taxes and other revenues to be collected by the regional/ state governments through the representative Bureaus of regional Revenue Authorities. Personal income tax on employees of state government and private enterprises within the regional states, Taxes on sole proprietorships businesses within the territory. Agricultural income tax, Royalties and land rentals on mining activities. Fees and charges relating to licenses and services rendered by organs of the regional governments, Rural land use fee.

concurrent power of taxation A concurrent power of taxation exists where the federal government and the state governments have joint constitutional authority to levy and collect a particular tax. The federal government and state governments shall jointly levy and collect the following taxes and other revenues: Taxes on enterprises jointly owned/established by the federal and regional governments. Taxes on private companies. Taxes on dividends due to shareholders of private companies, and Taxes on incomes derived from large-scale mining

Revenue sharing for concurrent power of taxation Types of Joint Revenue Revenue Sharing Ratio Jointly Established Companies Federal Government State Governments Profit Tax As per Capital Share As per Capital share Employee Income Tax 50% Indirect Taxes 70% 30% Private Companies Dividends Minerals and Petroleum Royalty 60% 40%

Undesignated powers of taxation For taxes which are not specifically listed to be collected either by the federal government, state governments or jointly by the federal government and state governments The house of the federation and the house of people’s representatives shall, in a joint session, determine by a two-third majority vote on the exercise of powers and taxation.

End of the ……….. Finished!