ADDIS ABABA – Application of coercive law with the support of latest technology has been found effective in tax collection, according to Ministry of Revenue.
Minister of Revenue Adanech Abebe told The Ethiopian Herald that, willingness of tax paying community in Ethiopia is low. She said that, rather than persuasion method now days it is better to collect tax with the support of rules or coercive method. Study indicates that, waiting the willingness of tax paying community in Ethiopia is difficult and leads to tax evasion.
Even though updating the system with latest technologies and knowledge is mandatory, bringing about a significant difference on the mindsets of its employees, taxpayers and the public is also crucial to set the system on the right course, says Adanech.
The Authority has recently launched a National Tax Revenue Movement under the theme “Delivering on my responsibility I demand my rights!” across the country. Thus, modernizing the system and developing tax-paying culture are the major agenda that have become focus areas.
According to recent audit findings, the authority seems to have much complicated challenges that would make modernizing its system and putting maximum effort on awareness and human resource capacity building inevitable.
Meanwhile, Adanech says the issue is not a sole responsibility of the governmental. It is rather a national agenda, which requires the effort of all responsible citizens. “Not only bringing latest technologies or software but we need to bring change of mind set of our employees and the tax payers.
Studies indicate that, though Ethiopia has a big potential for tax revenue, tax evasion continues to be an imminent challenge. To overcome the problem it is better to make strong law on tax issues, she elaborated.
On the other hand use of technology such as cash register machine and VAT is on the right track. It clearly indicated the difference before using the machine and the result after that. But still the problem is not avoided. The use of this application improves compliance by increasing the probability of detecting tax evasion. The application of cash register machine has increased VAT collection and payments and provides accurate information on expenditure and revenue flows, she added.
Minister of Finance Ahmed Shide said on his part the government has in recent years introduced several reforms to boost domestic resource mobilization particularly that of taxes. Tax evasion in Ethiopia is widespread and pervasive. However the use of technology has improved the magnitude. Tax evasion in Ethiopia had been around 60 percent before introduction of Electronic Sales Register Machine (ESRM).
ADB introduced a program of technical assistance to build the capacity of ERCA, to utilize the massive information in their data base to guide policy and daily operation. Ethiopia needs much more comprehensive tax reform, than what it currently has in order to meet target.
Abebe Shimeles Macroeconomics Policy, Foreca-sting And Research, African Development Bank said that (AfDB) said that, our findings suggest that, there is a substantial degree of tax evasion. Business subject to threats increase their tax payable by 38 percent while those that, received a persuasion letter increased by 32 percent compared to the controlled group.
As to him it is better to use coercive method in Ethiopia. As a way forward persuasion may be through giving awareness is also a best ways. It is our belief that, a combination of incentive to tax payers and strong capacity to utilize the huge administrative data Ethiopia could increase the tax GDP ratio to approximately 18-20 percent for a constant GDP. This is a huge gain but still effort required to sustain growth rate of 11 percent over the next ten years. Thus, Ethiopia needs much more comprehensive tax reform.
The Ethiopian Herald May 04/ 2011
BY HAILE DEMEKE
