Short title this proclamation may be cited as the tax administration proclamation no. Accordingly, the goe prioritizes industrial park development and expansion. Apr 12, 2020 value added tax amendment proclamation no. Tax policy reforms focus on improving the efficiency and equity of the income tax system, modernizing tax administration by enhancing technical capacities, and reforming indirect taxation. Tax reform discourse and its implication on development. Ethiopian tax system strikes one as random, disorganized, and incoherent in places. Value added tax as a tool for national development in ethiopia 1.
In ethiopia, the adoption of vat to replace the out dated general sales tax as of january 2003. The impact of tax reform on private sector development 1 introduction 1. To examine the relationship between value added tax and revenue generation in nigeria to establish the effects of value added tax on revenue generation in nigeria 1. In ethiopia, from the time when modern tax system took a root, the 1940s, there have been a number of attempts to improve the tax system. The list is from the ethiopian revenues and customs authority erca. Vat will be charged at a rate of zero percent for supply of gold to the national. Value added tax registration, rates, and exemptions in. Official pdf, 80 pages world bank documents world bank group. Value added tax is a recent addition to the tax regime in ethiopia. Branch the ethiopian revenue and customs authority erca submitted by me for the. In addition the international development committee 2012 recommended that uks aid program should increase its focus on supporting tax authorities. The paper suggests that in ethiopia attempting to implement what is legislated in the main areas such as refunds deserves the governments due attention. Ethiopia introduced value added tax vat in the year 2003 as a replacement to.
Taxation in ethiopia direct and indirect taxes categories of tax payers declaration of income and assessment of taxes tax incentives. Managing valueadded tax vat liabilities across a range of countries presents considerable financial risk, especially when the complexity of vat is underestimated. Valueadded tax vat vat is charged, under the value added tax proclamation on the supply of goods and services by registered persons, and on the importation of goods and services into ethiopia and services performed by a nonresident person who performs services for a resident in ethiopia. Ryans team of international vat consulting professionals includes the industrys most respected tax experts in north america and europe. This redistribution is controlled by the relative needs of the various provinces and the amount of revenue collected. Whereas, an equalization turnover tax imposed on persons not registered for valueadded tax allows them to fulfill their obligations and also enhances fairness in commercial relations and makes complete the coverage of the tax system. Ramaswami parameswaran2005, public finance and taxation, departments. The principal taxes currently in place are company profit tax, turn over tax value added tax vat, excise tax, customs duty, income tax from employment and income tax from business.
How working in ethiopia impacts your us expat taxes. Value added tax vat, input tax, output tax view show. Whereas, an equalization turnover tax imposed on persons not registered for value added tax allows them to fulfill their obligations and also enhances fairness in commercial relations and makes complete the coverage of the tax system. A reflection of problems 147 of filing and payments, refunds, audits and penalties. Standard vat is currently fixed at the rate of 15%. The value added tax and sales tax in ethiopia, length. Tax this page presents links to guide you on types of taxes, tax rates, exemptions, tax filing procedures and other information you need when you start up a business as a selfemployed person, a partnership or a limited company. The study has attempted to examine the impact of tax audit on tax compliance in ethiopia, at federal level by using secondary macro data. Ethiopia has recently implemented the value added tax system to its tax regime. A comparative overview dasalegn mosissa jalata lecturer department of accounting and finance, college of business and economics, wollega university, post box no. Value added tax registration, rates, and exemptions in ethiopia.
A reflection of problems wollela abehodie yesegat abstract this paper examines vat administration in ethiopia and identifies key problems including lack of sufficient number of. Now, therefore, in accordance with article 55 1 and 11 of the constitution of the federal democratic republic of ethiopia it is hereby proclaimed as follows. No extensive research has been done in these essential and critical features of the comparison. Tax regulations in ethiopia details written by administrator published on 30 april 2008 category. Income and value added taxation income taxation in ethiopia it has been in constant revision. Taxpayers moral and compliance behavior in ethiopia. The study also emphasises the need to strengthen the administration capacity in general and the tax audit program in particular. Fifty years ago the value added tax vat was rarely heard outside of france and a few dry specialist texts. The main reform to indirect taxation was the introduction of a. The value added tax and sales tax in ethiopia by alexander. Value added tax as a tool for national development in ethiopia.
Tax exemption in ethiopia vancouver ethiopian blog. The vat regime under ethiopian law with special emphasis. Pdf as most of the developing countries do, ethiopia was highly dependent on external financial resources to finance its development activities. Dec 17, 2015 value added tax is a recent addition to the tax regime in ethiopia. Ethiopia is one of the poorest countries in the world, with a per capita gross national income of less than. Value added tax as a tool for national development in ethiopia dasalegn mosissa jalata lecturer department of accounting and finance, college of business and economics, wollega university post box no. Since the jurisprudence of ethiopian taxation is yet to develop fully, this. For many decades, the tax contribution to gdp was very less and this needs an improvement. Ethiopia has implemented the value added tax primarily to raise more revenue, modernizing its tax. Various taxes have been introduced at different times with the.
The focus of this paper is to identify determinants of tax revenue in ethiopia by using a. Combining the two factors, we can infer that while. Ethiopia sales tax rate vat data, historical chart, and calendar of releases was last updated on february of 2020 from its official source. Twtfcy i52 the value added tax and developing countries carl shoup file ay value added tax vat is a tax on the value that a business firm adds to the things it buys from other firms in producing its i own product. This redistribution is controlled by the relative needs of. Aug 16, 2009 the paper suggests that in ethiopia attempting to implement what is legislated in the main areas such as refunds deserves the governments due attention. If you have wondered what things are exempted from payment of vat value added tax in ethiopia, i have the list for you below. Assessment on the value added tax implementation in ethiopia. Tax has been replaced by value added tax, and the overall taxation.
A comparative overview this paper appraised and compared concisely the ethiopian value added tax vat and sales tax. Tax rate and tariff reductions, overhauling the tax system and improving tax admin. The government undertook a significant reform on its income tax system in the year 2002 and issued income tax proclamation no. Pdf assessments of value added tax vat administration in. Nenggapratama internusantara as a taxable entrepreneur is in accordance with law no. We are more accustomed to talking if ever about income taxes even then, of specific income taxes, the value added tax, or customs duties than of the ethiopian tax system as a whole.
The authority came into existence on 14 july 2008, by the merger of the ministry. For example both oecds task force on tax and development 2010 and the g20 keen, 2012, highlighted the importance of tax collection in developing countries. Pdf value added tax collection challenges in ethiopia. The sales tax rate in ethiopia stands at 15 percent. As a developing country, the nature and type of export items are few in number and originate from specific regions.
Here are the highlights of the value added tax proclamation and regulation. Tax on foreign trade is a major source of tax in ethiopia. The wbg would like to thank the ethiopian revenue and customs authority for their support in conducting the tax. Value added tax administration in ethiopia unsw business school. Standard integrated government tax administration system. Taxation in ethiopia in ethiopia a company, based on its activities may be required to pat the following taxes. The value added tax and developing countries carl shoup file ay value added tax vat is a tax on the value that a business firm adds to the things it buys from other firms in producing its i own product. A comparative overview dasalegn mosissa jalata lecturer department of accounting and finance, college of business and economics, wollega university, post. 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.
Ethiopia aspires to be a leading manufacturing hub in africa by 2025. The main reform to indirect taxation was the introduction of a value added tax vat in january 2003. In line with this, the vision of the ethiopian government. Value added tax, implementation of vat in ethiopia, implementation challenges, jigjiga town introduction value added tax herein after vat is a general consumption tax assessed on the value added to goods and services. The vat regime under ethiopian law with special emphasis on. Vat is imposed for every imported goods and services other than an exempt imports and an import of services. Key highlights of new vat legislations 2019 mesfin tafesse. Subnational value added tax in ethiopia and implications for states fiscal capacity. Being a tax levied on the final consumption of goods and services, vat is collected at each stage of production and distributions when value is added up on them.
The ethiopian government has recently revised existing value added tax vat legal regime that has been in place since 2002. Definitions in the tax laws including this proclamation, unless the context otherwise. Most developing countries are emerging from the crisis with their fiscal prospects broadly intact imf, 2010a, but with many still facing a fundamental need to raise more revenue from their own tax bases. 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. Ethiopia sales tax rate vat 20142020 data 20212022. Experiences show some federations allocated personal income taxes to the central government while others have done so to the regions solomon, 2006. Apr 11, 2011 taxation in ethiopia in ethiopia a company, based on its activities may be required to pat the following taxes. Oct, 2014 value added tax as a tool for national development in ethiopia 1. 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.
In addition, the costs of vat administration were briefly examined in the case of jantschers 1990 study. The role of value added tax on economic growth of ethiopia. The general objective of this study is to examine the impacts of value added tax on revenue generation in nigeria. Tax base of sales tax and vat value added tax is often considered to be essentially a retail sales tax.
As most of the developing countries do, ethiopia was highly dependent on external financial resources to finance its development activities. In ethiopia, the adoption of vat to replace the out dated general sales tax as of january 2003 becomes the central landmark tax reform. A word or term in these regulations shall have the same meaning that it has in the. During the period of 199394 to 200203 the federal revenue to gdp ratio has increased from 8. On this page, you can find the rate of vat in ethiopia, voluntary and obligatory registration of vat in ethiopia, zero rate vat in ethiopia, and vat on imported goods. Value added tax in ethiopia operating costs and compliance by wollela abehodie 2009 and the influence of tax. No extensive research has been done in these essential and critical features of the comparison of sales tax with vat in the ethiopian context. The value added tax and sales tax in ethiopia, author. Value added tax refund practices and revenue performance in ethiopia. Interest in enhancing revenue mobilization in developing countries is increasing.
The impact of tax reform on private sector development. Sales tax rate in ethiopia is expected to reach 15. The health and education taxes, and the two provincial taxes, are later reallocated to the provinces for their own use. The value added tax vat proclamation no 2852002 which has rescinded and replaced the sales and excise tax proclamation no. Apr 30, 2008 tax regulations in ethiopia details written by administrator published on 30 april 2008 category. This paper examines vat administration in ethiopia and identifies key problems including lack of sufficient number of skilled personnel and gaps in the. Oct, 2014 the value added tax and sales tax in ethiopia 1. Poverty, incidence analysis, valueadded tax, povertyrelated expenditure. It is a consumption tax for it is borne ultimately by the final consumer.
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