Gov’t to double indirect tax collection

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The government targets to double the current fiscal year domestic indirect tax collection from the performance registered in the just ended fiscal year.
Recently Eyob Tekalign, State Minister of Finance (MoF) told Revenue, Budget and Finance Standing Committee that for the year the government targeted to expand its revenue from indirect taxes that are mainly value added tax (vat), excise tax and others.
Members of the standing committee raised their concern that due to the COVID 19 pandemic the economy will be affected, which also influences the tax collection operation.
In his response Eyob explained that the government has considered the effect of the pandemic but it has mainly focused on indirect taxes than direct tax, which is mainly corporate or income tax.
“We will work strongly to expand the tax collection from indirect sources and reforms in the area are being done,” he explained.
For the last few years the country was working to expand the tax base and on regulatory and enforcement areas to boost the tax collection, which is very low even compared with peers in Sub Sahara countries.
In the last budget year MoF has also revised the excise tax proclamation that is expected to enlarge the revenue from this tax sector. The amended proclamation also gives a right for the government to revise the percentage every two years, which is a usual trend in other countries like neighboring Kenya.
From domestic indirect tax the collection will be about 85 billion birr that is ambitious compared with the performance for the 2019/20 fiscal year. In the last fiscal year the revenue from indirect tax the government estimated it was close to 41 billion birr, while the projection was to get almost 71 billion birr.
From local domestic commodity VAT, the government has targeted to earn 30.5 billion birr that is 27 percent higher than last fiscal year projection. Domestic commodity VAT expected revenue for the year is also 61 percent higher than the actual performance for the 2019/20 fiscal year, which was 19 billion birr.
The expected service VAT for the year is 39 billion birr with 10 percent increment compared with 2019/20 fiscal year and 118.6 percent compared with real achievement. In the last fiscal year the government projected to earn 35.5 billion birr from service VAT but the performance was close to 18 billion birr.
The import commodity VAT for the year was set to be 37.7 billion birr and the actual performance was 34 billion birr.
For the year the government has targeted to earn 107 billion birr from all VAT sources. In the past year 96.7 billion birr was expected, while the actual performance is estimated to be about 71 billion birr.
According to last year projection from domestic commodities excise tax collection, the government was expected to secure 10.4 billion birr, while the real performance was 3.3 billion birr.
For this year the commodity excise tax collection is expected to be 13.7 billion birr that is 31 percent higher than the past year and 313.4 percent compared with the performance that was 3.3 billion birr.
The import commodity excise tax revenue has also set to be 14 billion birr with 30.4 percent increment from the expected earnings for the 2019/20 budget year. In the 2019/20 fiscal year the project from import commodities excise tax was 11.4 billion birr, while the earning was close to 11 billion birr.
For the current fiscal year the government has targeted to collect close to 28 billion birr from all excise tax sources.
In the past year close to 22 billion birr was expected from excise tax, while the result was 14 billion birr.
According to the budget document of MoF, the revenue from customs duty collection is expected to increase significantly. According to the projection for the year the government targeted to get 45 billion birr.
From the direct tax the government has expected to earn close to 66 billion birr, which has reduced by 9 percent compared with the 2019/20 fiscal year target.