More companies to face audits this year

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The Ministry of Revenue (MoR) announced that it would conduct a risk-based audit of over 3,089 business during the current fiscal year. About 2,179 companies will undergo a risk-based tax audit which is a significant increase from previous years.
“Because there are many uncollected taxes in Ethiopia the audit gap is expected to rise parallel to our auditing capacity,” said Zeru Gebru a director at the Ministry. “We have about 450 auditors and based on our performance audits are going to increase.”
The Ministry uses 22 parameters to determine risk. Some major red flags that will bring about an audit include consistently declaring loss or an ongoing loss or listing many unnecessary expenses. Known as cost aggravation, this is many done by construction contractors who often have declared purchases that do not actually exist.
Another huge red flag is when the assets and debts are out of proportion. If debts keep increasing and assets keep declining the Ministry is likely to investigate for illicit activities.
Desk audits will be conducted on companies listed as medium risks. These are conducted over a few days by going through documents published by the taxpayer.
Another problem frequently found in the construction sector is bulging costs, when companies who frequently make large profits make many purchases which can then be inflated illegally.
“We will trace if the cost is real or not only by conducting the appropriate audits,” said Zeru.
The large taxpayers’ office (LTO) is conducting its risk-based audit of its 272 taxpayers who have entered into a high-risk zone based on the 22 parameters. The branch office currently has 770 taxpayers after the government decided to take the public enterprises out of the branch office last year.
Among the total risk-based audits plan by the LTO 46 of them are companies working in the import and export area. The Office which consults the companies on the high-risk existence in the sector the 172 Importers and exporters participated and raised their issues to the ministry. ERCA faced 10billion birr revenue gap for the quarter
In its quarterly report, the ministry announced that the collected revenue was 3.21 billion birr lower than planned. Revenue to be collected from the inland tax was aimed to be 28.8 billion birr. However, this was declared to be 7 billion birr, compared to collectable customs duties which raised the total revenue uncollected to 10.72 billion birr, according to Netsanet Abera, Deputy Director at the Authority.
“The decline in revenue is lower than the same period last fiscal year,” Netsanet told Journalists. “We are hoping the gap will be filled with the current month’s revenue collection when 90percent of the tax payers will pay their annual taxes.”