Counterfeit invoices, manipulations on cash register machines (CRMs) and unlimited cash transactions have become the major challenges in tax collection, Ministry of Revenues disclosed.
In an exclusive interview with ENA, Tax Fraud Investigation Director, Sisay Gezu said audit findings and financial intelligence have confirmed that full and partial tax evasion mainly emanate from fake invoices and unauthorized cash register machines.
“Over 400 billion birr fake transactions have been effectively tracked and identified over the last fiscal year,” he revealed.
Sisay noted that as the country “is engaged mainly in cash-based economic transaction which makes it difficult to trace the actual liquid money in the entire financial flow.”
He disclosed that the ministry is working in cooperation with National Bank of Ethiopia to control the transaction process.
According to him, awareness building activities are underway to increase tax income.
“The public needs to develop the habit of collecting invoices for any payment made as that helps to increase tax,” he explained.
Civil Service University Public Financial Management and Accounting lecturer, Azime A. Hassen said “reviewing the tax system is crucial as the economic structure changes. Tax policy measures should be adopted to increase the tax base in which the growing agricultural sector of the smallholder farmers has to be put properly under the tax administration of the federal government.”
The Ethiopian tax system consists of direct and indirect taxes. The direct tax categories include agricultural income, land use fee for farmers, personal income, rental income, business profit, interest income and capital gain tax. The indirect taxes includes such as VAT, turnover tax, excises, stamp duties, customs duties, and export taxes.
Azime told ENA that tax is an accord between government and people, in which the former is liable to build awareness as a market strategy even in school curriculums. The media should also play a leading role in creating awareness on the importance of tax.
He urged institutions to build strong tax control system and take educational measures and punish tax evaders.
“The ministry needs to identify which category of tax payers are evading tax and the governmental institutions must be strong enough to stop evasion,” the lecturer added.
Efficient tax payment system should be in place for tax payers to save time for their business and to avoid any possible loss of income they may encounter during their stay at the tax office.
Moreover, the researcher insisted in the introduction of cash register machines that show real time transaction activities online like in other countries in order to help administrative decisions and measures.
Property tax should be introduced in the country, in addition to income and consumption taxes to create economic fairness and equity.