Ethiopia witnesses increase in revenue collection with implementation of tax reforms

Revenue collection in Ethiopia has significantly augmented after the government implemented tax reforms to boost resources, said the African Development Bank.

A workshop was recently hosted by the African Development Bank and a high-level delegation from the government of Ethiopia where the above findings were disclosed, a press statement from the bank revealed. A study found that the introduction of electronic cash registers increased value-added tax collections and payments by about 32 percent, with variations by sectors of activity, size of firms and locations.

“This increase can be considered large. However, given the low tax base, there is significant scope to mobilize domestic resources by accelerating reforms, notably on the use of third-party information on taxpayers, promoting electronic tax filing and payment systems, and enhancing analytical capacity using comprehensive national databases,” the statement noted.

The workshop formed part of the Bank’s commitment to helping the Ethiopian government fund its ambitious development plans. The African Development Bank, in this context, conducted original research to evaluate the impact of major tax policy reforms in Ethiopia, in association with the Ethiopian Development Research Institute and the Ministry of Revenue and the Ethiopian Customs Commission (formerly Ethiopian Revenue and Customs Authority). The research findings were discussed during a half-day dissemination workshop in Ethiopia’s capital, Addis Ababa, as reported by New Business Ethiopia.

Similarly, an innovative study based on a randomized field experiment revealed that the threat of being audited could increase tax payments by 38 percent, while moral persuasion could increase collections by 32 percent. These findings will expand the authorities’ tax reform policy options, particularly those related to voluntary compliance.

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