BY ABEBE W/GEORGIS
In relation to tax paying and interpretations, complaints were raised for a long time by taxpayers. There were also some misunderstanding between tax collectors and payers on executing the tax laws.
In correcting the inconsistencies witnessed in execution of the tax laws, recently the Ministry of Finance introduced directives signed by the State Minister Eyob Tekalign sent to the revenue commission.
The document tries to resolve some 40 shortcomings of the tax law and defines the approaches of the execution of the law in detail. To implement the directives mandate is given to the revenue commission.
The directives enable to implement the tax laws uniformly and consistently and can bring justice in the tax system. In addition, helps to defuse the misunderstanding between the tax collector and payer.
The main purpose of the introduction of the directives is to respond to the appeal raised by the first level tax payers in this regard.
Currently, consensus is reached by the Ministry of finance and the revenue officials to implement the introduced law.
Among the main issues the directives stressed includes, the vagueness and the interpretation of capital asset growth, tax payment on capital gains, obtaining benefit or losing in relation with foreign currency earning, about submitting of receipt for purchasing goods from farmers or pastoralists, and how annual leave changed into fee.
In addition to these, payment for health professionals’ duty, vulnerability and other benefits are mentioned. Explanation is also given on the directives with regard to excise tax.
Solutions also put with regard to problems on the value added tax. Other articles with regard to tax laws which have vagueness are also explained in detail and solutions are forwarded.
There are also questions raised by indebted taxpayers with regard to submitting appeal to court about their grievance. While the matter is on due process the request forwarded by the revenue authority to pay additional tax left the matter for controversy and became source of grievance.
However, based on the tax administration proclamation article 50 the paid tax which is proved to be more than the required amount will be returned to the payer based on sub article 4 and this all explained clearly and in detail in the directives.
The directives also gave explanation with regard to the immunity of foreign workers in industrial parks from paying tax.
The proclamation of the establishment of industrial parks stipulates that foreigners working in the parks be free of tax for five years beginning from their employment day. The income tax proclamation also stipulates that foreigners employed by investors engaged in foreign trade for the sake of knowledge transfer to be free from income tax for five years.
In relation to this, questions were forwarded by investors with regard to whether foreigners benefit from all proclamations or not. Now the directives addressed the raised questions in this regard.
It is understood that the privileges given to foreigners in all proclamations is to encourage exporters to supply quality products to the outside market so as to boost the nation foreign currency earning capacity.
The directive also indicated that the tax immunity is given to only foreigners employed by business men who engaged in foreign trade. But it should be understood that the tax immunity is legitimate for not more than five years.
With regard to obtaining profit through providing loan to the employee below the market interest rate, the document explained that, gaining from employment income stated on the Council of Ministers promulgated law is characterized by vagueness as the result, implementing them brought difficulties. Therefore, it is corrected.
As mentioned above, implementing the law which indicates the benefit obtained from the provision of loan to the employee was difficult to implement hence, it is improved. And the directives stated that only the money is obtained through loaned money at an interest rate below the market price.
Some employers use the bank’s interest rate as a bench mark and others use the interest rate of the bank where the employee works and use the difference between what the bank provided loan to the customers and the interest rate when he refunds the money.
The directives notify that banks have different rules in how to set the interest rate when they provide loans for the investment and private affairs purpose. When the banks provide loans to the customers who are not the bank staff, they set the rate based on the sector types and when the amount of the interest rate is lesser than the average rate, the worker gains a benefit based on that amount.
For a long time, the tax levied on the shareholders profit was very controversial and recently the Ministry of Finance gave detailed explanations in this regard.
The tax imposed on the shareholders dividend must be set based on the income tax proclamation. But still not clear whether the setting is based on the amended proclamation which stresses on obtaining profit from net income or based on the old proclamation. And to resolve the misunderstanding the directive put rules as follows.
The rule notifies that, the council of Ministers income tax rule number 410/2009 article 52 says an organization which notified the amount of the trade profit is below what the auditor general announced, the organization will be inhibited from obtaining the profit.
In addition, it says that the trade organization money allocated in order to gain profit is considered to be free from tax duty. Though the expenses are not deducted for the sake of tax payment, the dividend that is going to be shared by shareholders will not be included in this category.
The Ethiopian Herald October 27/2021
