22 January 2014 News Round Up


ERCA set to reduce income tax



The Ethiopian Revenue and Customs Authority (ERCA) is going to revise the current income tax proclamation by next year.
Girma Taffese, director of inland taxes at the Ethiopian Revenue and Customs Authority (ERCA) says that ERCA will consider revising income taxes and developing an improved tax code after the Growth and Transformation Plan sunsets in 2015.
ERCA officials fielded many complaints from around 1,000 business owners that are considered high tax payers who contribute 40 percent of the Nation’s tax income, on Thursday January 16 at the National Cultural Center, in Sidist Kilo. They responded by validating some of their concerns and promising that federal officials were working on revising tax laws and procedures.
One participant said that the decades old income tax proclamation should be revised in light of Ethiopia’s rapidly changing economic conditions. Currently anyone with a salary of 5,000 birr and above pays a tax rate of 35 percent. An individual making 3,500-5,000 pays 30 percent.  After that the tax rates are 25, 20, 15 and 10 percent respectively. At one time a 5,000 birr monthly salary was considered to be upper income but inflation has gone up dramatically since the tax rates were first imposed and as a result the government should revise them, they said.
Grima told Capital that some tax proclamations will be replaced by the end of the 2015 fiscal year.
Another speaker voiced concerns with the turn over tax (withholding tax) imposed when business owners provide ‘freelance’ services for other companies.
A person with a business license will have a tax identification number (TIN) that they receive from ERCA, they then have two percent of their gross income deducted by the company they provide services for and are responsible for paying a 30 percent profit tax at the end of the year. However, if the person providing the service does not have a business license and thus does not have a TIN number the company has to pay income tax for that individual which can run as high as 35 percent.
“The government needs to have some flexibility with these rules,” they said.
ERCA spent the day responding to many complaints and saying that they are only doing their job trying to make sure people pay the taxes they legally owe on time.
“We are not trying to hurt tax payers or scare people but we are implementing assessments on selected tax payers to make sure they are not evading taxes,” officials said.
But the business people in attendance said they have had a different experience.
“The business people cannot operate if they always have to be looking over their shoulder scared that they might make some mistake, to develop the country we have to be able to fearlessly invest, the government must respect the business community as we are all trying to help the country prosper,” one person said.
Participants at the discussion said that ERCA has to find another way to enforce tax laws besides frightening traders.
“We understand that there are individuals who evade tax but ERCA is taking a guilty until proven innocent approach on almost all businesses even though most people want to comply with the law and pay their taxes properly,” one of the participants explained.
Another said that they doubt ERCA will successfully end tax evasion by operating like they currently are.
“It is very hard for us to survive this way,” the participants said.
The business people also complained that the auditors who work for ERCA are either incompetent or corrupt.
“They only want to impose penalties on companies, they have no interest in educating tax payers or explaining the proper procedure,” one person said.
Some say that ERCA tax from profit that gose to raise their company’s capital. When tax penalties are levied they are often exaggerated, the participants said.
“These penalties may force companies out of business,” one participant said.
Participants also were concerned about a new management system where one staff member leads a group of five other staff members. This meeting, termed ‘one to five’ is seen as taking time that could be used providing services.
“ERCA should say when the meetings are being held so we do not waste our time waiting at their offices,” one person said.



GE Chairman to talk oil



General Electric Company (GE) Chairman and CEO Jeffrey R. Immelt is to visit Ethiopia in two weeks Capital learned.

It will be the Chairman’s first visit to the country and he is expected to hold talks with Prime Minister Hailemariam Desalegn along with a number of other high government officials. During his visit, Immelt is expected to talk about potential investment areas such as energy and the health sector. There are also expectations that there will be discussions regarding oil production in Ethiopia. GE operates as an infrastructure and financial service company. It’s Oil and Gas segment provides surface and sub-sea drilling and production systems, compressors, turbines, reactors, and industrial power generation. The company is engaged in the oil sector in several countries including Brazil and Nigeria. Reports show that GE businesses in Nigeria represent the biggest GE platform in Africa. It is involved in the Nigerian oil sector through its partnership with giant oil companies.

As Ethiopia’s potential oil findings spark attention, last week GCL Poly Petroleum, a Chinese petroleum company that signed a petroleum production sharing agreement (PPSA) with the Ethiopian Ministry of Mines (MoM) to develop the gas filed at Ogaden, also signed a Memorandum of Understanding (MoU) on Wednesday January 8, with the government of Djibouti that will allow the company to construct two pipe lines stretching from Ethiopia to Djibouti. GCL Poly Petroleum Investment that signed a deal with Ethiopia in November 2013 to develop gas reserves at Calub and Hilala has signed a MoU with the Ministry of Energy in charge of Djibouti’s Natural Resources that will allow the company to transport gas and oil products to the port.

Besides possible oil discussion, GE is also expected to make an investment in the health sector. The company’s health sector segment provides medical imaging and information technologies, medical diagnostics, and patient monitoring systems; and disease research. General Electric reported net income of USD 4.2 billion for the fourth quarter of 2013 on revenue of USD 40.38 billion. Reports show that profit in the company’s aviation, oil and gas, and appliances divisions all rose 20 percent or more in the last quarter.



Agriculture investors laud increased honey, milk consumption



Twenty Ethiopian entrepreneurs in the sesame, dairy and honey sectors came together for the first Ethiopian Agribusiness Investment Forum, a presentation intended to entice investors to their business at the Sheraton Hotel on January 16, 2014.  The program, funded by USAID through its Ethiopia Sustainable Agribusiness Incubator activity, was implemented by Precise Consult International as part of the U.S. feed the future initiative. The investment requirements of the companies vary from USD 10,666 for B Honey, a company that produces pure and infused honey to USD 791,263 for Select Honey and Products Inc. which makes honey and honey by-products.

The twenty companies have average sales ranging from USD 33,627 to USD 2.4 million. “There are scientists, entrepreneurs, financers…in short all the relevant stakeholders in the value chain of agri-business here,” said Fitsum Arega, Director General of the Ethiopian Investment Agency. “Ethiopia has a lot of natural resources. We just need the technical expertise and financing,” He continued to say that the agency is interested in strategic investments, especially those in agro-processing and cotton farming.

The agency’s interests seem to be aligned with that of the U.S. Feed the Future Initiative which plans on transforming the Ethiopian agriculture industry by increasing the competitiveness of the entire value chain. “Investment in agriculture is 2.5 to 3.0 times more effective in increasing the income of the poor than non-agricultural investment,” said Gary Linden, Deputy Mission Director of USAID. Agricultural development is given precedence in the Agricultural Growth Program (AGP) of the Ethiopian government, he further elaborated.  Therefore in the next five years, USAID will invest USD 250 million in support of the AGP.

State Minister of Agriculture, Mitiku Kasa, who opened the event, said that the Ministry of Agriculture has been making a concerted effort to develop every type of commercial agriculture by private investors. This is why selected sectors that are labor intensive and use domestic raw materials like those in the agro-industry get special access to credit, land and tax incentives. “The current development plan of Ethiopia, the Growth and Transformation Plan (GTP) envisages continued and rapid growth of agriculture with an even faster growing industrial sector,” said Mitiku. “When we speak of industrialization we envision it to take place on the back of  strong agriculture.”

Ethiopia is the fourth largest sesame and beeswax exporter in the world. It is also the 10th largest exporter of honey in the world and the largest exporter of livestock in Africa. Ethiopia has a milk consumption of 24 liters per year for every person. The rise of income, population growth, increasing availability of production and a growing culture of milk drinking were said to be positive indicators of the dairy industry’s growth.



Addis Light Rail Project 50 per cent complete


The Ethiopian Rail Way Corporation announced that Addis Ababa Light Rail Project is 50 per cent complete.

Briefing journalists about the current status of the project yesterday, Corporation Public Relations and Communication Directorate Director Abebe Meherete said that the construction of bridges, laying of grades and sideways has been undertaken in an accelerated manner in four directions of the city.
Presently, over six-km grades has been laid. On the other hand, other infrastructural development–telephone and electric lines as well as water pipelines are being laid side by side with the railway project.
In some project sites, the contractor, China Railway Engineering Corporation (CREC) has been working day and night to complete the task according to schedule, he said.
“Unless the project faces unforeseen challenges beyond the capacity of the corporation, the ongoing construction will not stop even for a minute and the contractor has been making utmost effort to finalize the project ahead of the schedule.”
Currently, the difficult part of the civil work is nearing completion. In some areas, 17- 22m depth excavation task has been taking place to erect bridges. Side by side, the corporation has been working with various stakeholders to prepare sideways both for pedestrians and vehicles, Abebe said.
To date, the project faces no financial and technical constraint. It is being undertaken at a cost of $475 million USD of which, 15 per cent of the cost is covered by the government.
The country is constructing nearly 2,400-kms of national electric railway and 34-kms of light rail in Addis as part of Growth and Transformation Plan ending in 2015.



Ethiopia passes law banning smoking in public


Ethiopian House of Peoples’ Representatives pass a new tobacco control proclamation.

The proclamation prohibits smoking in public places and it also includes putting enormous taxes on and increasing the price of cigarettes.
The proclamation also enforces for the cigarette packages to have a notifying message as to the health dangers of tobacco.

Moreover, the proclamation forbids advertising and promoting tobacco products on the media.



Ethiopia saves 2.3 mln. USD by blending ethanol with benzene


Ethiopia has managed to save 2.3 million US dollars in the first quarter of this budget through blending 2.5 million liters of ethanol with benzene, the Ministry of Water, Irrigation and Energy (MoWIE) said.

Public Relations and Communication Director at MoWIE, Bizuneh Tolcah, told WIC today the 2.5 million liters of ethanol was produced by the existing Fincha and Metahara sugar factories.
According to Bizuneh, Fincha and Metahara sugar factories have the capacity of producing 20 million and 12.5 million liters of ethanol per year, respectively.
Ethiopia envisaged increasing the amount of ethanol production to 181 million liters when the new sugar factories planned to be constructed in the Growth and Transformation Plan (GTP) is completed, he said.
He said Ethiopia can save 57 million US dollars at current price by the end of the GTP period through blending only 64.4 million liters of the total ethanol produce.
Since it commenced blending benzene with ethanol in 2009, the country has supplied 41.77 million liters of ethanol blended benzene to the local market, thus saving 33.23 million US dollars, he said.



Meeting of Permanent Representatives Committee launches the 22nd AU Summit


The 27th Ordinary Session of the Permanent Representatives Committee of the AU opened on Tuesday (January 21).
Opening the session, Dr. Dlamini Zuma, Chairperson of the African Union Commission, called for the strengthening of the working relationship between the AU Commission and the PRC in order to build a strong and efficient continental institution.
She expressed appreciation to the PRC and its sub-committees on multilateral affairs and other partnerships for working with the AU Commission.
The AUC Chairperson expressed worries over the conflict situations in Central African Republic and Southern Sudan while acknowledging progress made in Mali, Somalia and Madagascar which she said should make the Commission more resolute than ever to fulfill the pledge of the 50th Anniversary Solemn Declaration not to bequeath to future generations of Africans the legacy of wars and conflicts and silence the guns by 2020.
The Chair of the PRC, Ambassador Kongit Sinegiorghis of Ethiopia, called for deliberation on ways to enhance the institutional capacity of the Commission.
She expressed satisfaction with the progress made in the advancement of the peace, integration and development agenda as reflected in the Commission’s report for 2013 as well as the successful celebration of the Golden Jubilee of the Organization of African Unity, now the African Union. Ambassador Kongit stressed the need of the PRC and the AU Commission to improve their working relations.
The PRC will discuss items on the agenda in preparation for the 24th Ordinary Session of the Executive Council (January 27-28) which will in turn pass on recommendations to the Assembly of Heads of State and Government (January 30-31).
The PRC discussions are taking place against the backdrop of the launch of 2014 as the year of Agriculture and Food Security.
This year also marks the 10th anniversary of the adoption of the Comprehensive Africa Agriculture and Development Program.
The PRC meeting on Tuesday observed a minute of silence in memory of famous Ghanaian- born journalist and BBC broadcaster, Komla Dumor, who passed away Saturday.



Active public engagement to develop Abay    


The Office of National Council for the Coordination of Public Participation on the Construction of Grand Renaissance Dam said the labour contribution of 28 million people in natural resource development and protection both during Kiremt and Bega seasons is valued at 35 billion birr.

In an exclusive Interview with The Ethiopian Herald Office Deputy Director General Zadig Abrha said the people have carried out natural resource conservation and drainage development in the river course of Abay thereby protecting the sedimentation threat of the dam and soil erosion. Accordingly, close to 7.7 million indigenous seedlings have been transplanted on the course of the river covering nearly 4.8 hectares of land over the last two years.

Apart from the significant role the people are playing in natural resource and drainage development, he said a huge sum of money has been collected from people in all walks of life who pledged at different times with their own will and aspiration for the realization of the construction of the Dam.

According to him, the promise and actual payment on the part of the business community is significant. Some made 100 per cent payment in time while others 50 per cent of their pledges. And of course, civil servants have a great share in this regard, he said.

He noted that the construction of the Dam would be further strengthened backed by vibrant public diplomacy to show the Egyptian people that their government is deluding them regarding the issue of Abay.

As the Dam is part and parcel of the country’ development drive, the momentum of public participation should be kept said Zadig.

In this regard, Water, Irrigation Development and Energy Minster Alemayehu Tegenu recently noted that Ethiopia is building a huge dam on the river course of Abay solely to meet its hydroelectric demand and this could be made feasible with the proven fact that the Dam wouldn’t cause any damage on the riparian countries.

He said the result which the study of panel of experts uncovered this past May 2013 depicted the building of the Dam creates no harm yet Egyptian are adamant in renouncing the project. “We will build the Dam to eradicate poverty not to harm Egypt.”

Sudan’s stance on feasibility of the Dam and its positive negotiation on the trans-boundary river are appreciable. Sudan will benefit from the Dam as it contemplate from Tekeze Dam, according to him.

It is learnt that the Dam construction is more than 30 per cent complete.



Zone harvests 8 million quintals


Some eight million quintals of agricultural output was harvested in Kembata Tembaro Zone of Southern Nations, Nationalities and Peoples State during the main crop season, the Zonal Agriculture Department said.

Department Head Elias Wollencho told ENA that the stated amount was harvested from more than 80,000 hectares land.

The stated amount exceeds the previous year by 1.2 million quintals.

He attributed the success for timely and effective distribution of rainfall, utilization of inputs and modern technologies.




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