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This time he has one big reason to celebrate. His
office targeted a higher collection than ever before
– 34.6 billion Br for the entire 2009/10 year, and
17.6 billion for the first six months. His second
quarter report proudly announced that he not only
accomplished that but exceeded it by 200 million Br
or 1.14pc.
“We have performed much better than any other time,”
Melaku Fenta, director general of ERCA told
Fortune. “This is probably our first time to
achieve 100pc of our target.”
The signs were already becoming clear in the first
quarter after it collected 12.3 billion Br or
96.6pc.
However, for the past few years, ERCA’s numbers told
a different story. In the 2008/09 fiscal year, its
first year as ERCA, it set out to collect 30 billion
Br or over 55pc of the 54.3 billion Br national
budget the federal government had announced for the
year. Part of the budget deficit that year resulted
from the collection of only 23 billion Br, a
whopping 23.3pc off target.
The previous year it had a more modest target of
26.3 billion Br, but fell short of its target by
16.3pc, achieving only 22 billion Br.
In October 2008, Prime Minister Meles Zenawi
expressed his disappointment in Parliament. The
budgeted amount was not being collected because of
the weakness of ERCA. The reluctance of taxpayers to
respect their obligations was also a hindrance to
the government’s efforts to collect the targeted
revenue, he said. A prime example was the 13,000
taxpayers recognised as major taxpayers, he
mentioned. He pointed to that as the major cause of
the budget deficit.
In 2008/09, the government did away with both the
Ministry of Revenue and the Customs Authority and
created one single body known as the Ethiopian
Revenue and Customs Authority with the former
minister, Melaku Fenta, continuing as the new
director general.
Four deputy director positions under Melaku were
created: Law Enforcement, Corporate Functions,
Operations, and Change Management departments.
That first year, ERCA would fail by 22pc, achieving
only 19.5 billion Br out of the targeted 25 billion
Br, even as the authority was criticised in
Parliament for its increasingly high ambitions that
were rarely matched by a zeal to meet them. Sufian
Ahmed, minister of Finance and Economic Development,
drew further attention by announcing in July 2009
that the target for the 2009/10 fiscal year was an
even higher 34.6 billion dollars.
This time, though, the authority was able to silence
all criticism in both the first, and, as it appears,
the second quarters. ERCA’s success was in part due
to the share of domestic sources which leaped to
53.4pc, beyond the planned 52pc.
“We should focus on developing the trend of
depending more on domestic revenue sources,” he
said, indicating that it was also the international
trend to depend more on this source than on customs
duties.
According to Melay, ERCA had worked strongly to
control the contraband trade, to enforce the value
added tax (VAT) law, as well as to conduct post
audit clearances on 14,000 files over the past one
year, desk audits on tax payers going back three
years, and comparisons to determine whether declared
figures matched data obtained from cash registers
and from ERCA branch offices.
The Law Enforcement Department, headed by Gebrewahid
Woldegiorgis reported that it had been able to stop
83 million Br worth of goods from being smuggled in
or out of the country in the first six months of
this fiscal year. ERCA prosecutors took the cases to
court and scored 90pc favourable rulings.
Gebrewahid’s
investigators had also been busy tracking alleged
VAT evaders, getting court sentences against 104 of
them.
“If someone does not carry out a requirement a in
lawful manner, then you have to show that there are
consequences,” he said.
But ERCA initially preferred provide to regulatory
assistance to raise the awareness of taxpayers in
the system, Melaku said. This included promoting the
use of cash register machines.
These machines, also known as fiscal printers, were
initially supplied by Petram Plc, but six other
companies have been accredited since then. These
companies include Omedad Plc, Jupiter Trading, Haron
Computer Plc, Addis Home Depot Plc, All African
Entrepreneurs Plc, and Merchandise Wholesale Import
Trade Enterprise. The seven companies import devices
from Germany, Japan, Serbia, Greece, Bulgaria and
China.
The post and desk audits have helped the authority
gain information, which helped it achieve its
targets, Melaku believes. Many companies that
reported losses the previous years all reported
profits under the stricter controls of the
authority. Five thousand additional businesses have
also joined the league of those registered for VAT,
Melaku said.
Even though the changes and the achievements are
good, Melaku believes, the question of the
sustainability of such results in months and years
to come is still a matter the authority needs to
focus on.
“The agenda that will make us sleepless now is how
we can sustain this trend,” he said.
ERCA would continue
working to increase its tax collection, in addition
to ensuring the presence of a properly functioning
and respected tax regime with the proper enforcement
of laws, the director general said. |
