Ethiopian taxation system pdf

If the person is not resident of ethiopia gets his income which has its source in ethiopia also should pay tax. Ethiopian inheritance laws and regulations duration. Pdf overview of ethiopian excise tax hcbst 2016 amanuel. To align the ethiopian system with the international trend towards indirect taxes, the government introduced a valueadded tax vat of 15 per cent on 1 january. Here are the formulas on how to calculate personal employee income tax, pension, gross and net income in ethiopia. Taxation in ethiopia in ethiopia a company, based on its activities may be required to pat the following taxes. Tax is a compulsory payment made by an individual or a corporate establishment legal entity to the government. It is an important and most significant source of revenue of the government. A study on assessment of tax administration system on. Each reginal state has a power of taxation withen its own jurisdiction. Taxation in some form is an invariable attribute of an organized political society, and, under whatever name it exists, it becomes sooner or later the principal means of raising revenue for public purposes.

A study on assessment of tax administration system on category b tax payers, gamo gofa zone, snnpr, ethiopia ato. Executive power is exercised by the government while legislative power is vested in the parliament. This site is like a library, use search box in the widget to get ebook that you want. The principal taxes currently in place are company profit tax, turn over taxvalueadded tax vat, excise tax, customs duty, income tax from employment and income tax from business.

It is therefore worth clarifying the ethiopian tax system and the rationales behind for the business owners through the relevant institutions that have access to and ability to understand this booklet. Vat replaces the old business tax system of commodity and service taxes including the sales tax and the withholding tax. Consistency of the practice with the ethiopian transfer pricing rules. Ethiopian ministry of revenues mor is the body responsible for collecting revenue from customs duties and domestic taxes. Jul 08, 2016 as of the new budget year, which starts at hamle 2008 e. Constitution of the federal democratic republic of ethiopia, it is. In a moment of dismissive hubris, the ethiopian tax system may be described as a loose. Ethiopian tax administration download ebook pdf, epub. The employees income tax system divides taxable income into different tax bands. Click download or read online button to get ethiopian tax accounting book now. This study attempts to estimate tax compliance costs and assess views of taxpayers on aspects of the tax system in ethiopia. According to proclamation no 28694 any person whose permanent residence is in ethiopian, has to pay tax from the income that he gets within ethiopia or abroad. Tax doing business in ethiopia ethiopian business portal. An ethiopian tax and customs law is characterized by frequent repeal and amendments.

Performance and prospects of tax collection in ethiopia undp. A good tax system follows the principles of efficiency, fairness and easy to administer. Currently, in ethiopia revenue collected from tax is increasing due to improvement in tax collection methods and decrease evasion. The principal taxes currently in place are company profit tax, turn over tax valueadded tax vat, excise tax, customs duty, income tax from employment and income tax from business. The mofed at federal level and bofed at regional level leaded the reform undertakings in the government accounting and financial management. This booklet is the product of the common effort of the ethiopian bds network ebdsn supported by. Pursuant to the income tax proclamation these regulations are issued by the council of ministers pursuant to article 5 of the definitions of powers and duties of the executive organs of the federal democratic republic of ethiopia proclamation no. To find our way around them, some sort of classification is necessary. Jun 19, 2019 in this article, we look at the ethiopian tax system, types of taxes in ethiopia applicable to everyone. The government of ethiopia is structured in the form of a federal parliamentary republic, whereby the prime minister is the head of government.

The recognition of other principles of taxation in the ethiopian tax system. Our view corresponds closely to that of blough 1952, p. Since 199293, the government of ethiopia has made a major economic policy shift from central planning to market oriented economic system. It seizes and takes legal action on the people and vehicles involved in the act of smuggling while it facilitates the legitimate movement of goods and people. The easily earned income must be taxed more than the hard earned money. According to the above tax rate schedule, employees who earn up to 150 birr a month are below the threshold for paying employment income. This payment is usually a small percentage of a total earning, made to assist the government in offsetting its. Salary income tax calculation in ethiopia, pension, gross. The agony of tenants under the traditional tax system of ethiopia is.

The judiciary is more or less independent of the executive and the legislature. The ethiopian economy is still largely on subsistence level, and in spite of some progress made, ethiopia has only taken the very first steps towards economic and social development. The current fiscal system of ethiopia features some departures from the previous systems and striking continuities in the structure and essential elements of fiscal. Since the jurisprudence of ethiopian taxation is yet to develop fully, this. The vat rate is 15 percent of the value of every taxable transaction by a registered person and all imports of goods and services other than those vat exempted items in ethiopia.

This site is like a library, use search box in the widget to. The direct and indirect taxes applicable in ethiopia fikadu. To align the ethiopian system with the international trend towards indirect taxes, the. The new income tax in ethiopia new income tax calculations. Article 2 21 of the proclamation the tax year for an individual is, the oneyear period from 1st hamle to 30th sene, unless the authority has granted permission, by notice in writing and subject to such conditions. In preparation of that, we present in the following some principles. Apr 11, 2011 taxation in ethiopia in ethiopia a company, based on its activities may be required to pat the following taxes. Introducing modern taxation system oct 04, 2012, ethiopian press agencythe ethiopian revenue and customs authority erca announced friday that etax training and implementation for a number of taxpayers is well underway. Concurrent power of taxation revenue generated from the respective sources belongs exclusively to each level of the government. The number of proclamations, regulations and directives makes it to some extent difficult to understand this area of law. In line with this change, a series of tariff and tax reform measures have been taken. The new income tax proclamation has employees and low earners at its benefiters. Taxation in ethiopia direct and indirect taxes categories of tax payers declaration of income and assessment of taxes tax incentives addis ababa 12005. Fikadu asfaw and associates law office falo on oct 2011 related to taxes and accounting in ethiopia.

A free powerpoint ppt presentation displayed as a flash slide show on id. Replacing the outdated sales tax, vat is still the most fashionable taxing system in ethiopia. For comparison purpose, we have also added the old net salary, pension and income tax caluculation methods. The theory and practice in the assignment of taxation power identifies the following main criteria in assignment process. As of the new budget year, which starts at hamle 2008 e. Income tax regulations, assessment and payment in ethiopia. These are a range of income bands with different tax rates. Introduction to ethiopian government accounting and financial. Previous afrotsion construction wins yirgalem integrated agroprocessing. Taxation in ethiopia1 value added tax tax deduction. Apr 30, 2008 every person deriving income shall pay income tax in accordance with the proclamation and the tax administration proclamation. Legality principle of taxation in ethiopia papers in the ssrn. Ethiopian tax system strikes one as random, disorganized, and incoherent in places.

To align the ethiopian system with the inte rnational trend towards indirect taxes, the. This is direct tax, which a person pays from any income he gets. Pdf taxes and tax reform in ethiopia, 19902003 researchgate. Economists who have studied taxation and development have tended to see the evolving economy as the driving force behind the governments approach to taxation. So an individual foreigner, who lives in ethiopia for more than 183 days in a period of twelve calendar months, whether continuously or intermittently, is regarded as being resident for the entire tax period and is taxed in accordance with the provisions of income tax proclamation no. C the ministry of finance and economic cooperation mofec has announced this new tax proclamation. Though colm argues that each stage of taxation is interrelated to the other stages it would seem that presently in ethiopia haile selassie has, for political, administrative and economic reasons, decided upon the socialcritical type of tax system as. Feb 16, 2016 legality principle of taxation no taxation without representation was founded on the notion of social contract whereby people obey the sovereign only if its acts and actions improve their lives and enhance their welfare. It is tax policy in action, not simply the wording of the statute, that determines how much the taxpayer must pay, and the effects of the payment. Ethiopian taxation system is very important for raising income of the government. The direct and indirect taxes applicable in ethiopia.

Determinants of tax revenue of countries, as measured by tax to gdp ratio. Legality principle of taxation no taxation without representation was founded on the notion of social contract whereby people obey the sovereign only if its acts and actions improve their lives and enhance their welfare. And this paper aims at comparing both of them by focusing on the general context of tax base, tax rate, the methods applied to implement and administer them based on the proclamations and regulations available for each. Mar 19, 2018 employee pension 2,000 birr x 7% 140 birr. First, despite the legislative assignment of taxes, the actual potency of the tax network depends ethiopka the nature and development of the national economy, the relative distribution of fiscal federalism in ethiopia activities across jurisdictions, and the administrative. German technical cooperation ethiopian chamber of commerce. Ethiopian tax accounting download ebook pdf, epub, tuebl, mobi. The accounting and financial management system reforms under this package resulted a change on the fge accounting system that had been in. Click download or read online button to get ethiopian tax administration book now. Imperial ethiopian government, ethiopiastatistical abstract, addis ababa.

Knowledge of the statute is only a start in knowing a tax system. Schedule a employment income per month tax rate in % deduction in birr over birr to. May 2020 salary income tax calculation in ethiopia latest. Though colm argues that each stage of taxation is interrelated to the other stages it would seem that presently in ethiopia haile selassie has, for political, administrative and economic reasons, decided upon the socialcritical type of tax system as a replacement for the multiplicity of. In addition to raising revenue, the mor is responsible to protect the society from adverse effects of smuggling. Official pdf, 80 pages world bank documents world bank group. The accounting and financial management system reforms under this package resulted a change on the fge accounting system that had been in service for more than half a century. Below is a schedule that specifies tax bands and their tax rates. Public finance and taxation in ethiopia pdf in a moment of dismissive hubris, the ethiopian tax system may be. Taxation is a system of raising money to finance government.

Chapter two will introduce the students to the income tax in ethiopia. This should be borne in mind when we undertake research in a more adequate and just taxation system as well for our three countries. History of the post wa r ethiopian fiscal system, in e. Besides, tax administration system in ethiopia is still facing many problems. However, we will argue that this standard economic view needs to be augmented by an understanding of how political incentives shape the evolution of the tax system. Ppt taxation of smes in ethiopia powerpoint presentation. The findings of most of the researchers support that the most traditional factors, in conventional literatures. Taxes, taxation and the tax system taxes,taxation and the tax system prof. In this article, we look at the ethiopian tax system, types of taxes in ethiopia applicable to everyone. Tax, public finance, ethiopian taxation, direct tax and indirect tax jel classification.