2016年-世界发展银行全球_Tax_Compliance_Cost_Burden_and_Tax_Perceptions_Survey_in_Ethiopia_80页_5mb

Summary of the Tax Compliance Cost Burden and Tax Perceptions Survey in Ethiopia

Core Content

This report presents the findings of a tax compliance cost burden and tax perceptions survey conducted in Ethiopia in 2015 and 2016. The survey was carried out in Addis Ababa and four major cities (Adama, Hawassa, Mekele, and Bahir Dar), targeting both formal and informal businesses. It was conducted by the Department of Economics at Addis Ababa University, on behalf of the Ethiopian Revenue and Customs Authority (ERCA) and the World Bank Group's Trade and Competitiveness Global Practice (T&C GP). The survey aimed to understand the compliance costs and perceptions of businesses regarding the tax system, as part of the Ethiopia Investment Climate Program.

Main Objectives

• To estimate the tax compliance costs for businesses in Ethiopia
• To assess the perceptions of taxpayers regarding the tax system and business environment
• To identify challenges and opportunities for improving tax administration and encouraging formalization

Key Findings

1. Business Profile

• Most surveyed firms are small businesses (over 82% are in category C)
• Sole proprietorships dominate (93% of category C businesses)
• A large share of businesses (formal and informal) operate in the service and trade sectors
• About 50% of formal businesses and 87% of informal businesses reported that their primary activity is services or trade

2. Tax Compliance Costs

• The average total tax compliance cost for a business in 2012/13 was ETB 7,609 (USD 406), including software and hardware costs
• Without acquisition and maintenance costs, the average total tax compliance cost was ETB 5,842 (USD 311.7)
• The total tax compliance cost in Ethiopia was estimated at ETB 5.8 billion (USD 309.5 million) to ETB 7.5 billion (USD 400.5 million), depending on whether acquisition and maintenance costs are included
• Tax compliance cost as a share of turnover ranged from 4.7% to 5.4%, indicating a regressive burden
• Category C businesses (small) had a relatively higher share of tax compliance cost compared to larger businesses

3. Compliance Activities

• Most businesses (especially larger ones) perform in-house bookkeeping and tax compliance
• About 85% of businesses do all bookkeeping and tax activities in-house
• A significant proportion of businesses outsource tax compliance activities, particularly for VAT and profit tax
• The cost of outsourcing is highest for business profit tax (50%), followed by VAT (20%) and turnover tax (18%)

4. Perceptions of Tax System

• Businesses perceive the process of tax compliance as more burdensome than the amount of tax itself (54% agree)
• The biggest disadvantages of registering for tax include high tax burden (34%), complicated procedures (13%), harassment (8%), and frequent inspections (8%)
• The biggest advantages of tax registration are avoiding government retribution (23% for formal and informal businesses) and better access to land and premises (22% for informal businesses)
• For VAT registration, the biggest disadvantages are higher prices of goods and services (42%), while advantages include participation in government tenders and cash flow benefits

5. SRM (Sales Register Machine) Usage

• SRM is perceived to offer benefits such as reduced theft opportunities (20%), updated sales information (22%), and easier compliance (17%)
• Disadvantages include difficulty in correcting errors (36%) and the cost of the machine (19%)

6. Tax Inspections and Appeals

• About 31.7% of businesses reported facing inspections or audits in the last two tax years
• Only 36% of businesses perceived inspections as being for legitimate reasons, compared to 19% for informal payments and 19% for creating obstacles
• A small proportion of businesses (about 146) filed tax appeals, with some perceptions indicating dissatisfaction with the process

Key Recommendations

• Simplify the tax regime for micro and small enterprises to reduce compliance burden and encourage formalization
• Offer a fixed tax and turnover-based tax for micro and small enterprises, with an option for voluntary registration for profit tax and VAT
• Review the income tax rate structure and exempt income threshold, setting them at or near the poverty level and adjusting for inflation
• Adjust the VAT registration threshold periodically for inflation, as it is currently low by international standards
• Improve the risk-based audit system and encourage discussions with businesses to increase trust and reduce compliance burden
• Reduce the frequency of VAT filing to ease compliance for smaller businesses
• Investigate the dispute resolution system to understand why many appeals are not in favor of taxpayers and address underlying issues
• Exercise caution in imposing business profit tax based on bank deposits to avoid mistrust and reduce the incentive for using banking in business operations

Conclusion

The survey highlights that tax compliance in Ethiopia is a significant burden for businesses, particularly for small and informal enterprises. While tax compliance costs are high, they are not always proportional to the tax burden itself. The findings suggest that simplifying the tax system, improving transparency, and enhancing the efficiency of tax administration could help reduce the compliance cost and encourage more businesses to formalize. The report provides a foundation for policymakers and tax administrators to address these issues and improve the business environment in Ethiopia.