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New tax hikes pushing Ethiopians to protest the government

addisstandard 2017-07-17

Etenesh Abera

Addis Abeba, July 17/2017 – Frustrated by a recent significant tax increase in category “C” tax payers, which consists small businesses with an annual turnover of up to 100,000 Birr, cities in various parts of the Oromia regional state are seeing protesters testing the streets again.

On Thursday July 13, Addisu Arega, Oromia state public relations head, confirmed that residents opposing the new tax hike have damaged two state owned vehicles in Ambo city, 120 kms west of the capital Addis Abeba, and a city that saw the bloodiest crackdown during the 2016 nationwide anti-government protests that led to current State of Emergency.

Similarly, shocked by the increase, many small business owners in the capital Addis Abeba are queuing to return their business licenses or file complaints with the revenue authority.

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And this morning, undeterred by the ongoing State of Emergency, small business owners in Woliso city, 110 km west of Addis Abeba, and in Ambo have shut their businesses in protest and transport services going out of both cities to destinations including the capital Addis Abeba are disrupted, according to eye witnesses. Social media posts also show that residents of other cities and towns in various parts of the region are fiercely resisting the new tax hike.

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Although he claimed that the situation was largely under control, Addisu Arega also confirmed that there were plans for region-wide protests.

New tax rule

The revised Income Tax Proclamation, which was drafted by the Ethiopian Revenue and Customs Authority (ECRA) in collaboration with the Ministry of Finance and Economic Cooperation (MoFEC) came into effect as of the end of the fiscal year on July 07, 2017.

In the case of Addis Abeba, ERCA officials said that the authority deployed some 942 assessors who came from MoFEC and the Ministry of Trade (MoT) and constituted three supervision committees and 119 different inspection groups. They have been sent to evaluate the income of an estimated 148,000 traders in the city.

The state of Oromia too pursued similar methods over the past few months.

However, several letters sent from ERCA to small businesses in Addis Abeba, as well as those in Oromia state show that traders of small businesses such as street side coffee vendors, barbers, internet cafes and kiosks have received notice letters demanding them to pay annual taxes as high as 50, 000 birr and more.

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Martha, a hair salon owner who recently returned from Saudi Arabia using the three month amnesty, and opened her new hair salon told Addis Standard that after the assessors came to her salon and held a few minute’s conversation, she received a letter estimating her daily income to be 1, 900 birr, which she says “would not even be my monthly income.” According to the new estimate, Martha is required to pay 10, 550 birr annual tax. “I can’t pay that much, and if they jail me for that, they can,” she said.

Despite these complaints, authorities are adamant to review amounts levied on these businesses, saying businesses are simply trying to avoid paying taxes. On July 05, Nestanet Abera, ERCA deputy director for Addis Abeba tax division, told journalists that the confusion was rather due to lack of understanding than the amounts levied. “We have not imposed such taxes. The confusion is due to lack of understanding and the tendency of considering daily incomes as taxes,” Netsanet said, “our assessments were based on fairness and are appropriate.”

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She also warned complainants to file their complaints individually rather than in groups, as was seen during the last few weeks.

The weekly English Addis Fortune, quoted Birhanu Tadesse, coordinator of the tax policy directorate at MoFEC as saying, “This is disgraceful and shows how their tax understanding is small.”

Lemma Megerssa, President of the Oromia state, on his part said during a meeting over the weekend by the Caffee, the legislature of Oromia, that the region’s tax authorities would work hard to look into irregularities and complaints.

Over the last week, residents of several cities and towns in Oromia have been posting pictures of damaged public infrastructures such as roads, schools and hospitals on social media to make a point that taxes collected are simply embezzled than used to improve people’s lives.

Cover photo caption: deserted street in Woliso, today

Photo: Seyoum Teshome, Woliso

1 Comment

  1. Taxation in the old country is not ingrained in the culture of doing business or even ownership. The entire clan on my mother’s side never paid a red cent in taxes until it was forced to leave its small territory by other aggressive tribes. They were farming pastoralists. And those who have been small merchants and traveling traders used to pay once a year fee as a permit. That was it. I remember way back in the early 50’s(it could have been in the late 40’s) when the clan on my mothers almost went into a rebellion when one provoking district civil employee was trying to seize some of the cattle the clan brought to the market to sell as a tax. Actually he was looking for some one to butter his palms. His problem was that the clan had unwritten but gentlemen’s agreement with the commander of Menelik, Aba Shaitan, many decades ago that his soldiers would never go into the villages to collect any tribute if he was let pass thru the territory. The late emperor knew that and never tried to send his ‘goomrook’ officials to collect any tax or tribute. So when the district governor found out that the whole clan was in fit to mix it up he withdrew that tax collector and invited our elders to a meeting with the then provincial governor. My clan sent its elders and reminded the governor the truce with Aba Shaitan many decades ago. It was said that he took the issue all the way to the emperor and a new deal was reached where the clan would only pay a token fee per head of cattle when sold at the existing open markets. The emperor through his local officials explained why such a fee was needed. That the government needed the money to open new schools and clinics. I still remember the one very small clinic opened a few years after the face-off. In regards to my relatives who have been merchants, they never used cash register or any revenue and expense logbook as we know it up until some of them moved to the capital. Even then they were no cash registers most of the time. How many of you remember getting a receipt after a purchase? Well, paper was so scarce anyway. If you ask me about some of those merchants way deep in the countryside, they never paid a red cent most of the times. That country is still a frontier economy when it comes to taxation. But since the 1940’s and 50’s a system of taxation had spread into small towns and areas close to those towns. A culture of contraband is deeply rooted throughout the country. This is going to be a serious problem even if a democratic government is in place. Due to lack of written records the levy is going to be based on what the tax man estimating. That could end up being a sparking flint with many small businesses. Every modern developed country had gone through such fracas. Our own Good Ole USA had ‘The Whiskey Rebellion’ to deal with just a few years after independence. George Washington himself had to summon well armed militia to march on the rebellion. Luckily the rebels chickened out and his march ended with out bloodshed. Now, I am not equating that great man Washington with the confused philosopher Sebhat Nega and his deacons. But what I am saying is that such rebellion is expected and I was not surprised by the news. The difference is on the condition whether the tax payer will have to right to appeal the estimate and will receive fair justice. What algorithm is the taxman using for his decision? Or is it just a SWAG(Those of you who have been in the areas of operation management or industrial engineering know what I am alluding to). One thing is very clear to me. Now those who are itching to carve out a territory to call it their own fiefdom will pick up this anger and run with it. It is going to be a ‘liberation front’ issue, ‘casus belli’ so to say. I hear what they are saying now. ‘Here we go again. Neftegnas are at it again. They took our land and now they want to tax us for owning nothing’. Just go close to them and listen to what they are saying at their close quarters. Now they are priming the youth to throwing itself into a waiting inferno again. And they are doing that from their comfy homes here among us. Oh… Grief!!!!

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