Ethiopian Tax Research Network (ETRN)
The ETRN is a new initiative of the ICTD funded by the Bill and Melinda Gates Foundation. The goal of the ETRN is to support the generation and exchange of tax knowledge in Ethiopia by:
1. Providing a platform for knowledge exchange and for evidence-based debate on tax issues, through seminars and conferences.
2. Facilitating coordination and complementarity between existing projects and actors active in the area of tax in Ethiopia.
3. Providing funding for high quality, policy-relevant research mainly or wholly led and undertaken by Ethiopian researchers.
ETRN stakeholders include tax practitioners and researchers from both Ethiopian and international organisations. It is concerned with all topics related to taxation, ranging from tax policy to tax administration, and from academic papers to practical studies.
The ETRN was officially launched on the 20th of September 2017 at the Capital Hotel in Addis Ababa, with over 100 attendees.The event began with introductory remarks by Mezgebu Amha, Director for Macroeconomy Policy and Management at the Ethiopian Ministry of Finance and Economic Development, followed by a keynote by Professor Mick Moore, CEO of the International Centre for Tax and Development. The afternoon featured research and policy panels, with a variety of presentations of work done on taxation and development in Ethiopia. Find the launch programme here.
Governance: The ETRN is governed by a Management Committee, a consultative body with the responsibility to ensure the independence, relevance, and quality of the work undertaken by the Network. The Committee is composed of one representative from each of the following institutions: the Ministry of Finance and Economic Cooperation (MoFEC), the Ethiopian Revenues and Customs Authority (ERCA), the Addis Ababa University (AAU), rhe Ethiopian Civil Service University (ECSU), and the Ethiopian Development Research Institute (EDRI), as well as the Executive Secretary and the Research Director of the ETRN.
In October 2017 the ETRN issued a call for research proposals. After reviewing the many proposals submitted, the Management Committee has chosen six research projects to fund:
1. The Implementation of Presumptive Tax in Ethiopia
Researcher: Ato Abis Getachew, Ethiopian Development Research Institute
Motivated by the recent dispute between the business community and the Ethiopian Revenue and Customs Authority (ERCA), this paper studies the implementation of presumptive taxes in Ethiopia. It mainly focuses on the process of the application of the tax regime. In addition, the study will make a comprehensive assessment on how other African countries implement presumptive taxes.
2. An Assessment of ERCA’s Taxpayer Education Programs and How They Can be Improved
Researcher: Ato Azime A. Hassen, Ethiopian Civil Service University
It is difficult to shift tax culture and increase voluntary compliance without education and awareness raising activities. This study aims to evaluate the taxpayer education programs in Ethiopia. It will examine the content and design of mass media in the TV, Radio, national newspapers and trainings used by the ERCA to increase awareness, tax filing, and, ultimately, tax compliance. Currently, it consists of education programs using Gebi Lelimat Radio program, Gebi Lelimat TV program, trainings and newspapers. The unit of analysis is SMEs, specifically Category C taxpayers located in Addis Ababa. The study will use primary and secondary survey data.
3. Presumptive Income Tax Assessment for Micro and Small Enterprises, a Case Study of the Addis Ababa City Administration
Researchers: Ato Amanuel Mekonnen and Ato Endalkachew Mulugeta, Addis Ababa University
The study focuses on assessment of presumptive taxation of small and micro enterprise in Addis Ababa City Administration. It will evaluate the standard assessment processes and procedures, the criteria used for assessment, and the equity of taxes imposed by the tax authority. Data will be collected thorugh surveys and interviews.
4. Ethiopia’s Double Taxation Avoidance Treaties
Researcher: Ato Tesfay Assefa, Mekelle University
Ethiopia has undertaken various economic and foreign relations policy reforms especially after the country’s shift towards a free market economic system since 1991. As part of such multidimensional reforms, the country has undertaken a series of tax reforms, especially since 2002.This research will examine the policy backdrop of double taxation treaties in Ethiopia.
5. VAT Compliance Issues, Implications and Mitigating Strategies in Ethiopia: The Case of Federal Taxpayers
Researchers: Ato Gebregziabher G. Tsadik, Ato Assefa Gezae, Ato Worku Tamire, Ethiopian Revenues and Customs Authority
VAT, as a consumption tax, can contribute huge amount of tax revenue. But it does not play this role in generating tax revenue in Ethiopia because of low VAT compliance. This can be due to inadequate commitment and capability of tax officials, weak enforcement, low awareness of tax payers, limited application of laws and complex procedures. Therefore, the researchers will use primary and secondary data to assess issues and challenges that affect VAT compliance in three federal tax branches. They will use descriptive method of analysis and based on the findings they will recommend mitigation strategy to enhance VAT compliance.
6. Practices, Challenges and Prospects of Public Sector Taxation in Ethiopia
Researchers: Ato Sebsibe Fekade, Asnakech Lake, and Ronald Waisa, Ethiopian Revenues and Customs Authority and Uganda Revenue Authority
Ethiopia’s revenue collection performance remains low at 12.5% of GDP compared to the average for sub-Saharan Africa (17%). This is partly attributable to the failure of government entities to support tax administration. The public sector is vital in terms of withholding VAT payments and income taxes. However, these institutions experience little pressure from the tax administration to meet their tax obligations. This research will investigate public sector taxation in Ethiopia, employing data matching, comparative studies, textual analysis and interviews.
In most federal systems, state governments are funded through a combination of direct fiscal transfers from the central government, and the revenue they collect directly from locally adopted taxes. Ethiopia is a federal polity, but follows a slightly different path in the case of its most important tax source – value added tax (VAT). As…
Fiscal federalism comprises the distribution of functions and tax revenue sources between central and regional governments. Fiscal federalism issues in respect of value added tax (VAT) do not arise in unitary states; in federal states questions arise as to which level of government should levy the tax, and how revenue should be divided between central…
This article explores the fiscal effects of aid in Ethiopia using the Cointegrated Vector Auto-Regressive (CVAR) methodology to model complex long-run and short-run dynamics. We use national data for 1961–2010, including a measure of aid capturing flows through the budget as measured by the recipient. The data suggests three main conclusions on the long-run…
The reduction of poverty, and more recently inequality, are pressing concerns in many low- and middle-income countries, not in the least as a result of the Sustainable Development Goals committing countries to significant improvements by 2030. Redistribution is important for reaching these goals, and is shaped by countries’ tax and welfare systems. Despite redistribution resulting…
This ICTD Research in Brief is a two-page summary of ICTD Working Paper 48 by Giulia Mascagni and Andualem Mengistu. This series is aimed at policy makers, tax administrators, fellow researchers and anyone else who is big on interest and short on time. This paper looks at the challenge faced by many low income countries of increasing tax revenue dramatically while minimising distortions…
This paper reviews the fiscal history of Ethiopia, focusing particularly on the period between 1960 and 2010, for which detailed fiscal data is available to underpin the analysis. While reviewing the key fiscal and economic events of this period, particular attention is paid to the relation between Ethiopia and its donors, which in fiscal terms…
This paper computes and analyses the tax burden on Ethiopian corporations, measured by the average effective tax rate (ETR) on their profit. Our strongest result regards the relation between tax burdens and firm size. We find a statistically significant U-shaped relation between ETR and size. While small firms face the highest tax burden, the largest…
This study examines factors that determine business people’s attitudes towards paying taxes in Ethiopia. Based on data obtained from a survey of business taxpayers in Addis Ababa, the study finds a statistically significant relation between tax-compliance attitude and factors such as the perception of probability of audit, corruption, satisfaction with the tax administration, peer influence,…
Governments in developing countries are typically constrained by a limited fiscal capacity to finance the provision of essential public goods – a constraint that has been cited as one of the fundamental challenges to economic development. Several developing countries have recently implemented electronic tax systems (ETS) to improve monitoring tax compliance using modern information technology…
Last week, the Institute of Development Studies hosted its 50th anniversary conference titled “States, Markets and Society“. As part of the conference, the ICTD hosted a panel on the theme of taxation and fiscal contracts in Africa. The panellists were ICTD’s research directors Wilson Prichard and Giulia Mascagni, our Capacity Building Manager Jalia Kangave, and…