To tax or not to tax: is that really the question? VAT, bank foreclosure sales, and the scope of exemptions for financial services in Ethiopia

The Ethiopian Value Added Tax of 2002 follows the standard approach of exempting financial services from VAT. Not all ‘financial services’ are, however, exempted from VAT. A number of services provided by the financial institutions are made taxable by the VAT laws of Ethiopia. No subject in this regard has probably attracted as much attention and controversy as that of sale by foreclosure of property held as security by banks. Both sides (i.e., members of the financial industry and the tax authorities) seemed locked in their conviction over the treatment of foreclosure sales in VAT. Members of the financial industry (in particular banks) are convinced that foreclosure sales enjoy the privilege of exemption in VAT while some within the Tax Authorities are equally convinced that foreclosure sales should be chargeable with VAT. These controversies have played out in the courtrooms, the press and a number of communications between the Tax Authorities and the members of the financial industry. This article examines these controversies and analyzes the scope of exemptions for financial institutions under Ethiopian VAT laws

Income tax assignment under the Ethiopian Constitution: issues to worry about

The revenue provisions of the Ethiopian Constitution are striking on a number of levels. By and large, the revenue provisions do not evince conformity with what the theories of fiscal federalism generally prescribe in the area of assignment of revenue powers. In addition, the revenue provisions of the Ethiopian Constitution are more detailed than their counterparts elsewhere. And, the Ethiopian Constitution departs from the assignment formula set for expenditure powers and prescribes a special procedure for assignment of ‘undesignated taxes’. These features of the Ethiopian Constitution raise a number of questions and concerns. This article uses the income tax assignment in the Ethiopian Constitution to highlight some of these questions and concerns. There is ample evidence to show that the assignment formula adopted by the Constitution, indeed its predecessor - the 1992 law - was motivated by the desire to divide the power of taxation over existing taxes in Ethiopia rather than to reinvent the wheel. However, there might be a tension between the formula the Constitution adopts to assign tax powers and the prescriptions of the theories of fiscal federalism. The article explores the implications of this assignment

The Ethiopian Tax System: Excesses and Gaps

Article published in the Michigan State International Law Review

The Ethiopian Tax System: Excesses and Gaps

Article published in the Michigan State International Law Review

The ethiopian income tax system: policy, design and practice

Ethiopia used income taxes as one of the principal sources of domestic government revenue since the beginning of modern taxation in the 1940s. The Ethiopian income tax system is "schedular" in structure and orientation, the computation, assessment and collection of income taxes based on some identified sources of income, like income from employment, income from rental of property and income from business. The basic aim of this dissertation is to turn a critical attention to the design and structure of the income tax schedules and test whether the schedules, as they are currently designed, are adequate instruments for achieving the fundamental tax policy goals of Ethiopia. The dissertation uses the four schedules (identified by alphabets "A," "B," "C" and "D") of the "main" income tax system of Ethiopia to test whether the schedular design of the Ethiopian income tax system is adequate for achieving the fundamental aims of equity and administrability. The main finding of the dissertation is that the existing income tax schedules are riddled with a number of gaps as to make them inadequate instruments of the fundamental goals of tax equity and administrability. The basic principles of both horizontal and vertical equity are often observed in their breach both in the income tax laws of and the practice of income taxation in Ethiopia. Drawing upon the numerous cases of discrimination among different categories of taxpayers and sources of income, the dissertation calls for a serious rethinking of the schedular income tax system of Ethiopia. In rethinking the schedular income tax structure of the Ethiopian income tax system, the dissertation recommends two pathways of income tax reform for Ethiopia: the internal reorganization of the income tax system of Ethiopia, which maintains the schedular orientation of the income tax system but requires "internal" changes on a number of levels; and the complete overhaul of the schedular income tax system in light of the alternative models of income taxation developed both in the theoretical literature and the practice of income taxation in both developed and developing income tax systems of the world. (Published By University of Alabama Libraries