Implementation of VAT in Ethiopia: Critical Assessment of the Practice in Jigjiga Town

Abstract

Value Added Tax (VAT) has been introduced in Ethiopia in 2002, the administration of which is exclusively the Federal Government’s through the Ethiopian Customs and Revenue Authority (ERCA). However, since 2004, based on its power to delegate fully or partially the administration of VAT and other revenue collection activities, ERCA has been delegating its power to regional revenue collecting organs, including, Jigjiga Town Revenue Bureau. Yet, even if the Bureau has been delegated with this power there are various challenges in the implementation and enforcement of VAT, among others, shortage of adequate and qualified personnel and relevant equipments affecting registration process, how VAT operates, how VAT payment is filled, invoicing, claiming VAT credit, record keeping, VAT filing and return process etc.; lack of awareness with regard to taxpayers implicating on screening and identifying taxpayers; inefficiency of controlling and monitoring mechanism. The research, therefore, identified such problems affecting effective implementation of VAT in Jigjiga town and after careful analysis of the problem forwarded recommendations that could, not only be useful for the Bureau in Jigjiga, but also other delegated agencies with similar powers.

Keywords: Value Added Tax, Implementation of VAT in Ethiopia, Implementation Challenges, Jigjiga Town