Friday, July 12, 2024

VAT reporting period extended


The Ministry of Revenue (MoR) is vying to extend the Value Added Tax (VAT) declaration period beyond the current one month to three months.
MoR has been working to simplify tax law and become more efficient. Recently it made a change to the VAT refund directive, in order to have the refund delivered within 45 days instead of the previous five months.
Befirdu Messeret, Tax Payers Education Director at MoR, told Capital that they are trying to make doing business and paying taxes easier.
Sources at MoR told Capital they are trying to loosen the VAT declaration period and allow more time.
Currently businesses registered to collect VAT have to settle their collection in the month after the collection period. The current proposed option may allow VAT declarations to be settled within three months, although a final decision has not been made.
Many felt one month was too short a time to settle VAT and that MoR facilities were inefficient.
VAT collection, which is 15 percent of most of sales of goods and services, is a recent addition to the tax regime in Ethiopia, applied after the ratification of Proclamation No 285/2002 and implemented since 2003.
The tax body is also undertaking several changes in the tax settlement processes, which they plan to announce soon. They have also formed a group of government leaders under the chairmanship of PM Abiy Ahmed to improve the country’s doing business rank. The World Bank’s 2019 Ease of Doing Business put the country at 159 from 190 countries. Regional countries like Rwanda and Kenya stood at 29th and 61st respectively.
There have been marked improvements with tax collection in the past few months, which is a change from the trend of the last two years.
Compared with other countries tax collection is poor. Two years ago, the government improved the tax GDP ratio about 13 percent, then it declined to 11 percent last budget year. The government projects that the GDP tax ratio will stand at 17 percent by next budget year, which is the last year of five-year development program, Growth and Transformation Plan II.

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