The Ministry of Revenue announced that it has recently collected 83 billion birr (close to 3billion USD) from tax and non-tax revenues over the past five months.
Indicating the revenue from various sources is minimal when compared with the target set to achieve, the ministry noted that the very reason for the decline is the ever-increasing contraband trade. As a country undergoing an overall reform, the importance of an effective revenue collection system to support the state pparatus is crystal clear. Hence, the government has to take economic measures in order to thwart smugglers and encourage businesspersons who abide by the law, experts and officials say.
Dr. Atilaw Alemu is an Economist at Addis Ababa University. For him, contraband is an effort to evade a tax which causes the state to lose a significant amount of income. “Besides, contraband destabilizes the market and fair competition. It poses a threat on legal traders as they cannot compete with contrabandists,” he says. In short, the impacts of contraband narrow down or close the window of opportunity for legal business people.
Hence, the market would not be able to treat all the actors fairly. In addition, banned goods that are imported illegally do not meet national standards and hence are dangerous to the health of citizens, he adds. Dr. Atilaw also says contraband
trade may discourage legal manufacturers and hence force them to produce below capacity. Fantaye Abate, an Attorney for Crimes related to Economic Affairs Referring Customs Proclamation 859/2014/1/, Fantaye says that the act of smuggling is prohibited by the law. As to Fantaye, a trader who needs to import or export a given product has to acquire the permission of the third party. For instance, without the permission of the National Bank, possessing hard currency is not allowed. The same is true for goods such as mines, medicines and other.
Fantaye adds that a person who, knowingly or ought to have been aware of the fact, imports or exports or attempts to import or export prohibited goods under the cover of legally declared goods shall be punishable with rigorous mprisonment not less than five years and not exceeding ten years and with fine, not less than Birr 50,000 and not exceeding Birr 200,000, he stated.
The Law in addition states, “Any person who transports, stores, possesses, offers for sale or buys goods referred to in sub-article (I) of this Article while being or ought to have been aware of the fact shall be punishable with rigorous imprisonment not less than three years and not exceeding five years and with fine not less than Birr 50,000 and not exceeding Birr 100,000.” Dr. Atilaw suggests that in order to control contraband, first of all, the government should clear its tructure and expose corrupted officials who directly or indirectly support or cooperate with smugglers.
On the other hand, even though, there are laws that penalize the act of smuggling, contrabandists are always taking calculated risks. Identifying the reason why businesspersons prefer to engage in contraband is a solution to the problem, he states adding when there is a shortage of foreign currency, for instance, the merchants are forced to engage in smuggling to address the intricacy. So, considering the pros and cons of legal procedure, the government should come up with a mechanism to ease the problem, Dr.Atilaw advises.
Problems related to logistics, the legal process such as opening Letter of Credit are also factors that affect the legal business practice. So, besides conducting in-depth research on the issue, taking economic measure is crucial in order to encourage legal merchants, he adds.“Above all, the major factor in encouraging contraband trade in Ethiopia is the network structure.
There are people in checking points who deal with smugglers to share the benefit out of the illegal duty.” Fantaye says that though the law lays high level of penalty over wrongdoers, some limitations are clearly observed so as to dry the act to smugglers once and for all. Loopholes related to the working system, limitation of supervisors in checkpoints, and low level of awareness are factors contributing to expanding contraband in Ethiopia.
Herald January 31/2019
By Girmachew Gashaw
