Chapter one introduces students to the basic concepts, principles and underlying assumptions of the many tax laws of ethiopia at present. Ppt taxation of smes in ethiopia powerpoint presentation. Income tax regulations, assessment and payment in ethiopia. Chapter eight valueadded tax the panel developed and analyzed a proposal to adopt a valueadded tax vat that would replace a portion of both the individual and corporate income taxes. Corporate taxation typically imposes a tax on the income of certain types of business organizations and also taxes the profits distributed to the holders of the ownership interests. Pdf in most developing countries, income inequality tends to worsen during initial stages of growth, especially in urban areas.
The ultimate burden of taxation for each and every one of the person on whom the tax is levied. For these reasons, we believe that consideration of evasion, avoidance, and administration is essential to the positive and normative analysis of. The problem of land reform in ethiopia has hampered that countrys economic development throughout the late 19th and 20th centuries. So an individual foreigner, who lives in ethiopia for more than 183 days in a period of twelve calendar months, whether continuously or intermittently, is regarded as being resident for the entire tax period and is taxed in accordance with the provisions of income tax proclamation no. Chapter 6 direct and indirect taxes a tax may be defined as a pecuniary burden laid upon individuals or property owners to support the government, a payment exacted by legislative authority. Accordingly, the material deals with the following. For more detailed information on practical issues, we recommend to refer to a training manual, which the partnership project between the ecc and hwk has elaborated especially to assist category b and c taxpayers. The taxation of business organizations generally falls into two basic modelscorporate taxation and partnership taxation. It is based on the ability of the person one who generate the income.
Each reginal state has a power of taxation withen its own jurisdiction. Consistency of the practice with the ethiopian transfer pricing rules. In light of the foregoing, the central team and focus of this paper is the vat regime in ethiopia, which has become a priority and ngos operating in ethiopia. This is imposed and payable on selected goods, such as, luxury goods and basic goods which are demand. In a moment of dismissive hubris, the ethiopian tax system may be described as. A tax is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to. Fiscal policy is how congress and other elected officials influence the economy using spending and taxation. Chapter two will introduce the students to the income tax in ethiopia.
Value added tax vat this is a sales tax based on the increase in value or price of product at each stage in its manufacture and distribution. Introduction to taxation taxes are the price we pay for a civilized society. The application of ethiopian transfer pricing rules on multinational enterprises. The objective of fiscal policy is to create healthy economic growth. This means that suppliers and workers are effectively paid with pretax dollars, but that the profits are taxed before they are distributed to shareholders or other owners. The principal taxes currently in place are company profit tax, turn over tax valueadded tax vat, excise tax, customs duty, income tax from employment and income tax from business. Direct tax according to proclamation no 28694 any person whose permanent residence is in ethiopian, has to pay tax from the income that he gets within ethiopia or abroad. The impact of taxation is integrated into growth models by its impact on the individual growth variables, which are capital accumulation and investment, human. Taxation, borrowing and aid are not taken solely with reference to economics but also.
This paper has attempted to raise and identify a broad, but not comprehensive, range of critical issues relating to the treatment of the vat regime. Considering the relation between the tax rate and the tax base income, there can be four types of taxation, viz i proportional taxes, ii progressive taxes, iii regressive taxes and iv digressive taxes. Types of taxes paid by category and ownership type percent. Because presumptive assessment is intended as a means of ascertaining the taxpayers income in the face of inadequate data, the taxpayer should be allowed to present better. All tax laws should conform to the maxims of taxation equity 1. The main reform to indirect taxation was the introduction of value added tax in january 2003. Types of direct taxes income taxincome tax is collected on all incomes received by private individuals after certain allowances are made. The ethiopia investment climate program, managed by the world bank groups trade and competitiveness global practice, aims at streamlining and simplifying high priority regulatory practices and processes burdensome to the private sector and address investment climate issues that are holding back investment and productivity growth in ethiopia. The term taxation applies to all types of involuntary levies, from income to capital. A tax is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority. The direct and indirect taxes applicable in ethiopia. Taxation in ethiopia in ethiopia a company, based on its activities may be required to pat the following taxes.
In addition, the author noted as the sales tax base in ethiopia was narrow because it was limited. The vat regime under ethiopian law with special emphasis. Official pdf, 80 pages world bank documents world bank group. Pdf determinants of foreign direct investment in ethiopia. Pdf taxes and tax reform in ethiopia, 19902003 researchgate. Taxation in tanzania elimu ya biashara na ujasiriamali. The major types of taxes that exist in ethiopia, their meaning, rates and conditions, as provided by the federal inland revenue authority, are presented as follows. In the case of a business located and operating in ethiopia as the branch, subsidiary or. Taxation is a means whereby the state collects funds to pay for public services. Proportional, progressive, regressive and digressive taxes. Legality principle of taxation no taxation without representation was founded on the notion of social contract whereby people obey the sovereign only if its. Bear in mind that income tax is applicable to anyone who owns landed property, has an apartment rented out, has a business, or works in ethiopia, regardless of what his country of origin is.
Taxation 2 iia issues paper series tax provisions do not typically form a principal part of iias, partly owing to the existence of the taxspecific dtts. The ethiopian empire abyssinia was first founded by ethiopian people in the ethiopian highlands. Global mobility services taxation of international. Chapter eight valueadded tax university of north texas. Public finance and taxation in ethiopia pdf in a moment of dismissive hubris, the ethiopian tax system may be. The vat is a type of consumption tax that is similar to a retail sales tax but is collected in smaller increments throughout the production process.
Schedule a employment income per month tax rate in % deduction in birr over birr to birr. Taxes are generally an involuntary fee levied on individuals or corporations that is enforced by a government entity, whether local, regional or national in. Tax treaties and related documents between the uk and ethiopia. Direct tax is that tax where burden in borne by the same person on which it is levied.
However, weak tax administration, particularly in developing and transitional economies is the principal impediment to the successful implementation of value added tax. Income from rent of patent and copyright, income from winning lottery, income from share in companyetc fall under this category. Chapter 12, presumptive taxation 4 taxpayers income, based perhaps on arbitrary criteria or on whatever data are available. Taxation in ethiopia direct and indirect taxes categories of tax. The aim of this paper is to evaluate the impact of individual types of taxes on the economic growth by utilizing regression analysis on the oecd countries for the period of 20002011. Taxation refers to compulsory or coercive money collection by a levying authority, usually a government. The direct and indirect taxes applicable in ethiopia fikadu and. It will start with a brief look at the history of income taxes in ethiopia and will go on to look at different concepts and definitions involved in income taxation.
The main purpose of this booklet is thus to aware the business community the different types of taxes existing in ethiopia and some of the purposes for which the. Personal income tax, rental tax, withholding tax, business profit tax and. Pdf this paper attempts to study the determinant of fdi in ethiopia for the time period from 19812007. Accordingly, this teaching material tries to address, even though briefly, the basic component of tax law, especially in ethiopia. Double taxation agreement between india and ethiopia. For easy understanding, ethiopian tax must be broken down into 2 major parts. The principal taxes currently in place are company profit tax, turn over taxvalueadded tax vat, excise tax, customs duty, income tax. Direct taxes taxes which are collected directly from income and wealth are known as direct taxes. Constitution of the federal democratic republic of ethiopia, it is. Determinants of foreign direct investment in ethiopia. In the united states, the role of the government extends from providing for national defense to providing social security and medicare to the elderly. There are various provisions on taxation of fringe benefits provided by employers to employees. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent often but not always unpaid labour.
A free powerpoint ppt presentation displayed as a flash slide show on id. Taxation papers are intended to increase awareness of the work being done by the staff and to seek comments and suggestions for further analyses. The article covers the prehistory and history of ethiopia from its emergence as an empire under the aksumites to its current form as the federal democratic republic of ethiopia as well as the history of other areas in what is now ethiopia such as the afar triangle. Attempts to modernize land ownership by giving title either to the peasants who till the soil, or to largescale farming programs, have been tried under imperial rulers like emperor haile selassie, and under marxist regimes like the derg, with mixed results. It is used in conjunction with the monetary policy implemented by central banks, and it influences the economy using the money supply and interest rates. Now, what are the tax rates, and on what kinds of income should a person pay tax. Direct tax according to proclamation no 28694 any person whose permanent residence. Taxation papers are written by the staff of the european commission s directorategeneral for taxation and customs union, or by experts working in association with them. Introduction to taxation government plays an important role in most modern economies. Value added tax registration, rates, and exemptions in ethiopia. The types of taxes in ethiopia makes interesting reading for those who may be thinking of emigrating to ethiopia, for work, or to start a business. In most of the economies income tax is a major source of government revenue. That said, corporations may end up indirectly paying other types of taxes during the course of their business activities. Legality principle of taxation in ethiopia papers in the ssrn.
Employment income tax in ethiopia introduction individuals may receive various types of income such as wages or salary from employment, rent from letting houses or buildings, interest from lendingsaving money, and profit from their trading activities or business. Direct taxes are broken down further into five parts. That information is clearly and neatly provided below. The major types of indirect taxes in ethiopia are value added tax, custom duties, stamp duties, excise tax and turn over tax. One reason for the limited role of taxation provisions in iias is that the inclusion of taxation matters can sometimes unduly complicate and draw.
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