February 03, 2009

Adama Butcheries, Revenues Office in Tax Showdown

Butcheries in Adama Town of Oromia Regional State are in shock following a government income tax enforcement move that they claim is excessive. The businesses complain that the tax they are required to pay is so high that they may end up closing their shops because of bankruptcy.

However, the town’s Revenues Office argues that the income tax the business people are requested to pay is just and appropriate.

Instructed by the town’s revenue authorities, the businesses have recently recorded their transactions in individual ledgers.

Owners of the butcheries say that while they are complying with the instructions by the town’s administration, senior revenue officials who allegedly came from regional government have levied high tax rates on them.

“This decision is unjust and unlawful,” Mulugeta Desta, one of the butchery owners in the town, told Fortune. “We will appeal before the President of the Region against the decision.”

The businesses’ individual ledgers have now been disregarded, according to the complainants.

“Registering and having a ledger means willingness to pay tax,” Ameha Berhe, owner and manager of Mereb Butchery told Fortune. “But our ledgers have been disregarded without even notifying us about the decision.”

Value Added Tax (VAT) has been the other major source of contention between businesspeople and the town’s administration.

Those businesspeople who are VAT registered complain that the presence of a lot more people in the business but who have not registered for the same kind of tax affects their competitiveness.

“We VAT payers have to add the 15pc tax rate on the price,” Ameha said. “How can we compete with those who sell for 15pc less than charge for the same product?”

Ameha claims that he absosrbs the 15pc VAT himself so as not to lose business to his competitors.

That is not all that Ameha has to suffer. The town administration has also demanded that he settle half a million Birr income tax outstanding from the past three years.

“This is an amount that neither I nor my children can settle,” he told Fortune.

Though the administration has given people like Ameha the right to appeal against the decision, it is only possible after they have settled at least 50pc of the amount due.

In fact, Ameh is not the only one to bear the brunt of the effect of the decision by the Adama’s revenues officials to enforce income tax payments.

Atnafu Kebede, who is in the same business, has also been requested to clear the 300,000 Br income tax outstanding from the past three years.

“I have no other option than to close the business,” he told Fortune.

The Revenues Office, however, says the complaints are unjustified.

“We never disregard their ledgers arbitrarily,” Abera Aba-Erie, general manager of the office told Fortune. “We disregard only those with unacceptable and inappropriate records that are against accounting laws.”

The income tax levied on the businesses is within the legal and just rate, according to Abera.

Of the businesses that complain about the rate of income tax introduced by the town administration, 191, mainly butcheries, electronics and music shops have decided to jointly appeal against it before the regional government.

Amid the strife, the Adama Chamber of Commerce and Sectoral Association (ACCSA), has started an initiative to arbitrate the case.

“We will discuss the issue with the town’s administration next week,” Girma Gelana, head of the Secretariats of the ACCSA told Fortune.


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