Not only does Ethiopia need to increase tax collection and make tax systems more equitable and efficient to resume economic growth, reduce poverty and improve citizens’ livelihoods, but also other nations require balancing goals such as increased revenue mobilization and sustainable comprehensive growth via ensuring a fair and equitable system.
Taking all this into account, the Ethiopian Press Agency had a stay with Molay Woldu, a Tax Policy Department Head at the Ministry of Finance, in relation to the close nexus between tax and revenue following the recent macro-economic reform thereby giving the county a power to pay its debt back.
He said, “Undeniably, economic growth is the basis of increased affluence as it is a key objective for the government of the nation. The rate of growth can be affected by policy choices through the effect that taxation has upon economic decisions and through productive public expenditures. Hence, the recently ratified macroeconomic reform is significantly useful in fueling the stride geared towards economic advancement and socio-economic trajectories.”
As far as the tax reform especially the policy significance towards helping the government reduce loan burden is concerned, Molay said that the tax collection system and its proper implementation would have positive influence at national level and support the government build capacity to pay back foreign loan. Besides, this positive move would undoubtedly contribute to the effort towards reinvigorating the economic growth and foster a range of activities towards that end. It would also make a noteworthy contribution to augment transaction with regard to import and export products; even it has helped producers’ secure ample foreign currency.
As to him, most developing countries like ours strive to achieve economic growth and development through taxation, but they have been facing numerous economic challenges that need to be well abated via applying lucrative reforms. The tax collection and its proper implementation would help the government build capacity in due course of reimbursing debts.
According to Molay, the macroeconomic reform would be instrumental in generating tax revenue for the nation thereby engineering economic performance. The foreign direct investments would also positively influence the growth of the economy and abate the impact of inflation.
Besides, he added it would also contribute a lot to bolster transaction with regard to import and export products; even it has helped producers’ secure ample foreign currency.
Products will also be in a state of increasing and there will be a lot of opportunities to get citizens employed. Since the step would help increase production and productivity, the yield will be rising and this trend in turn helps the nation create a number of job opportunities. Yes, he said circumstances with regard to production and productivity have been well intertwined and highly glued when revenue or income increases, the capacity of the county to pay back debts would reasonably rise.
So, the system will be of paramount importance in paying loan back and even reining the rising trend of the existing stock. Therefore, it is possible to observe situations in relation to this reform in terms of two dimensions: in the first place, the economy will be highly motivated and the base of the tax would be made well widened, and the revenue solicited via utilizing local currency would increase from the products being exported to other nations and imported from overseas.
Second, when there is economic motivation and the country can produce more and its export items have increased, the price of commodities will also proportionally increase. Following this, the foreign currency the country would collect will proportionally increase.
Having these two circumstances in mind, as to Molay, it can be deduced that the foreign currency Ethiopia secures would increase and the country will have the capacity to pay its debt back and the stock would remain as it is, without any increment, of course.
So, the major target of the reform would be of significantly useful in reducing the loan. The policy reform is also of quite decisive for reinvigorating Ethiopia’s ties with international donors and some other financial institutions like the International Monetary Fund (IMF) and the World Bank (WB).
He further elucidated that collecting taxes is the main way for the nation to generate public revenues that make it possible to finance investments in human capital, infrastructure, and the provision of services for its people and businesses.
The very important thing here in Ethiopia can be, all other things keep intact, a country of having its own consent and capacity to buy whatever its citizens deserve and want. The previous way of course was benefiting finger counted individuals, but the recent one would be of highly relevant to make all segments of the society and citizens beneficiaries out of the marketing and economic system.
He said, “It is not a matter of forging ties, relationships and other amicable fashion; instead it is of our own way of doing business and get benefited out of the system. Whenever our economy grows, the country will be competent, capable and independent one to make sound decisions at its own reach. Hence, the reform is instrumental in bringing about such a remarkable change.”
In simple terms, he said building huge economy itself is a magnet that can prettily attract smooth relations and make the best allies as big economy is a viable weapon to get the country’s interests and sovereignty highly respected.
Responding to the question ‘the reform decidedly has been grateful for a market-oriented/market-led foreign currency,’ and what is this concept and what benefits can it bring to Ethiopian economic growth, Molay stated that the steps taken are really good to cheering tax collection means, encouraging investment and increasing import and export trade. Since it helps the income secured from tax, the development undertakings, be the existing ones or would be commenced, can be highly fostered.
Furthermore, the services rendered to the society or entire citizens will be well organized and prompt, and improved in terms of quality and quantity, too. Thus the increment of the tax revenue helps the community get all what they need and justify as economic growth is registered. The demand and supply equilibrium could also be quite close despite circumstances that need to be bridged well occur, basically the effect of the reform is not limited to some aspects as it can be applied on a number of sectors.
To reply to the question posed on him ‘Since the ban on imported commodities is lifted, what repercussions would be witnessed in this regard? Molay stated that this would help the nation boost local production in terms of quality and quantity as well as this will also cause the generation of profit and revenue. Hence, the input gained from local sources and from abroad would proportionally rise.
Molay said, “If we see the reform from the perspective of locally produced items and job creation, the economic motivation will be a feasible weapon to increase revenue, first. Second, the commodities and items the country imports from overseas can be sources of national income. Whenever the number of exporters and their items to export rise, the scope they cover widens. From such multitude of aspects, the nation can collect a great deal of currency or wealth from the tax. Such remarkable approaches in one way or another help the nation have huge revenue.”
As to Molay, the organizations or export operators can promote themselves and have ample opportunities to create a number of jobs for many citizens. From all these employment opportunities, the country in general and the organizations or companies in particular can gain much more revenue. On the whole, the country can accumulate a range of income generating means from import commodities and export items.
When it is seen from the perspective of price, too, he added the system would open competitive chances to do so at a reasonable rate.
In a nut shell, it is well recognized that collection of taxes and/or relevant fees from citizens and relevant organizations is a cardinal development priority as it is quite essential to finance investments in infrastructure, socio-economical aspects and human capital as well. True, the provision of services for citizens and businesses as well as setting the right price incentives for sustainable private sector investment are other invaluable moves to make a difference in the economic growth trajectory. In clear terms, the tight nexus between tax, revenue and paying national debt back is highly friendly since the rise of one magnetizes the mount of another.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD FRIDAY 2 AUGUST 2024
