Since a few months ago, numerous consecutive discussions have been held in cooperation with the Investment Commission, the Ministry of Revenue, and the Customs Commission, particularly on issues linked with the challenges and opportunities in the custom and revenue sector. As part of this process, several domestic and foreign investors recently held consultations with government officials at the Hilton Hotel, mainly on alarms which require immediate solutions and those need to be considered in the long run.
Nebiyou Samuel, Tax Advisor to the Minister of Revenue, briefed investors during the meeting in relation to feedback on taxation issues. In this case, Nebiyou explained more about the types of taxation system in Ethiopia, their implications, and application procedures.
Investors and representatives of various local and international companies who participated in the discussion have raised different questions and views on custom and revenue system. As the participants pointed out in the discussion, the forum is important particularly to the business community. In the past, there was no opportunity to discuss issues of concern with the government. Today, it is possible to come up with solutions, other that uttering about problems. The government is currently listening to the investor, which is the key to solve problems.
In an exclusive interview with The Ethiopian Herald, Hana Arayasellasie, Deputy Investment Commissioner, said that the Commission will take observations and questions from the participating investors and will attempt to address them in short and long term plans.
But, as investors explain in the discussion, most of the problems should be addressed promptly. They have complaints, particularly in relation to taxes and customs. The tax collection system is time taking and lacks transparency. Since it is difficult for an investor to get into investment sector with unclear taxation system, the government has to develop a transparent tax system which could be easily understood by investors. In addition, various incentives need to be provided to attract the investor in to the sector.
In this regard, Hana said that the Commission has been engaged in improving services in the investment sectors for many years, particularly in areas that are taken as a priority sector for investment. At the same time, the Commission is also now attracting quality investments in textiles and apparel, pharmaceutical sector, as well as agro-processing, in addition to focusing on new sectors. There is also a need to ascertain its sustainability.
According to Hanna, most of the problems in the investment sector are associated with government service provision, particularly in customs and revenue, as well as immigration and other government institutions. Thus, the commission will facilitate cooperative works with other stakeholders so as to identify issues that need additional information and create further transparency in the sector.
As to her, modernizing the tax system and improving laws and procedures are the major prior tasks to attract investment.
Besides, it is also important to consider the investment priority areas and government’s commitment to attract both domestic and foreign direct investment. The abundant workforces at very competitive wages, as well as the competitive cost of electricity and potential for backward and forward linkage are the key reasons for investing in Ethiopia.
On the other hand, since Ethiopia is located at the center of the world with easy access to international value chains, and has access to a state-of-the-art container port (Djibouti), it is preferred to invest in several sectors. Most of the priority investment sectors were presented for discussions.
In this regard, the Leather and Leather Products sector is one of the leading manufacturing sectors for Ethiopia. Currently, Ethiopia is exporting mainly finished leather products such as shoe, gloves, bags and small leather articles. Over 75 domestic and foreign investors have invested in leather and leather product, in which its export performance grows from 23 million USD in 2013 to 133 million USD in 2018. It is also expected to reach 800 million USD in 2020; and it will create employment opportunity for 59,580 citizens in the stated period.
In recent years, Ethiopia has grown dramatically as a sourcing destination for apparel and attracting most of the FDI in the sector. By 2020, it is planned to generate huge export earnings worth of one billion USD and to create over 300,000 employment opportunity in the sector.
Among other reasons, duty-free access to the European Union (EU) and U.S. markets through the African Growth and Opportunity Act (AGOA), can be considered as the major advantage for investors in the textile industry.
Thus, investors have to properly understand the country’s taxation system to be fully engaged in confidence in these advantageous investment opportunities. All these and other factors indicate that Ethiopia offers large and growing investment opportunities that could contribute to speed up the positive growth trajectory of the national economy as a way out from abject poverty in the years to come.
The Ethiopian Herald December28, 2019
BY ZELALEM GIRMA
