Old meets new: Ethiopian retailers’ adoption of electronic cash registers has driven up tax take. (Image courtesy: A Davey/flickr).

The Ethiopian government’s promotion of electronic tax registers has increased tax takes significantly, a new report by the African Development Bank (AfDB) has found.

According to the bank, since the minister of revenue began encouraging businesses to adopt new ‘ecash’ registry machines, value added tax (VAT) collections have increased by about 32%, with variations by sectors of activity, size of firms and locations. “Tax collection in Ethiopia has improved after the country introduced new tax policy reforms, especially the use of ecash registers,” commented Gabriel Negatu, AfDB’s representative.

Making tax less taxing

The Ethiopia Revenue and Custom Authority (ERCA) launched the Electronic Tax Register (ETRs) system in Addis Ababa in 2008, allowing the automated collection of sales data; the system will soon be available nationwide. For retailers, said Negatu, ETRs cut the burden of administration, simplify the process of claiming tax refunds, and reduce their dependence on tax agencies to help them submit declarations.

For the government, the use of ETRs has improved the timeliness of VAT submissions, reduced tax evasion, and improved data quality. Because ecash registers reduce the need for direct contact between tax collection officers and retailers, said the bank, they also minimise the opportunities for corruption.

Persuasion is potent

The bank also conducted research to evaluate the impact of major tax policy reforms in Ethiopia, in collaboration with the Ethiopian Development Research Institute (EDRI), the Ministry of Revenue and the Ethiopian Customs Commission. The research found that the threat of being audited could increase tax payments by 38%, while moral persuasion could increase collections by 32%.

“The studies were very timely and vital to complement the government’s reform efforts to enhance tax collection,” said Ethiopia’s minister of finance, Ahmed Shide.

A version of this article first appeared on our sister publication Global Government Forum


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