Abyssinia Law

Introduction to Fiscal Federalism and Division of Revenues under the Ethiopian Constitution

As a subfield of public economics, fiscal federalism is concerned with "understanding which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government". In other words, it is the study of how competencies (expenditure side) and fiscal instruments (revenue side) are allocated across different (vertical) layers of the administration.

It may be noted that the ideas of fiscal federalism are relevant for all kinds of government, unitary, federal and confederal. The concept of fiscal federalism is not to be associated with fiscal decentralization in officially declared federations only; it is applicable even to non-federal states (having no formal federal constitutional arrangement) in the sense that they encompass different levels of government which have de-facto decision making authority. This however does not mean that all forms of governments are 'fiscally' federal; it only means that 'fiscal federalism' is a set of principles that can be applied to all countries attempting 'fiscal decentralization'. In fact, fiscal federalism is a general normative framework for assignment of functions to the different levels of government and appropriate fiscal instruments for carrying out these functions. The questions arise: (a) How federal and non-federal countries are different with respect to 'fiscal federalism' or 'fiscal decentralization' and (b): How fiscal federalism and fiscal decentralization are related (similar or different)? While fiscal federalism constitutes a set of guiding principles, a guiding concept that helps in designing financial relations between the national and sub-national levels of the government, fiscal decentralization on the other hand is a process of applying such principles. Federal and non-federal countries differ in the manner in which such principles are applied. Application differs because unitary and federal governments differ in their political & legislative context and thus provide different opportunities for fiscal decentralization.

An original definition of fiscal federalism states that "fiscal federalism" concerns the division of public sector functions and finances among different tiers of government. In undertaking this division, Economics emphasizes the need to focus on the necessity for improving the performance of the public sector and the provision of their services by ensuring a proper alignment of responsibilities and fiscal instruments. While economic analysis, as encapsulated in the theory of fiscal federalism, seeks to guide this division by focusing on efficiency and welfare maximization in determining optimal jurisdictional authority, it needs to be recognized that the construction of optimal jurisdictional authority in practice goes beyond purely economic considerations. Political considerations, as well as historical events and exigencies, have in practice, played major roles in shaping the inter-governmental fiscal relations in most federations. 

Even in non-federal states, there has been a growing movement towards greater fiscal decentralization in recent years. Some analysts have attributed this to globalization and deepening democratization the world over on the one hand and increasing incomes on the other. Other specific reasons for increasing demand for decentralization are:

• Central governments increasingly are finding that it is impossible for them to meet all of the competing needs of their various constituencies, and are attempting to build local capacity by delegating responsibilities downward to their regional governments.

• Central governments are looking to local and regional governments to assist them on national economic development strategies.

• Regional and local political leaders are demanding more autonomy and want the taxation powers that go along with their expenditure responsibility.

Moreover, in recent years, decentralization has become a feature of reform agenda promoted and supported by the World Bank (as stated in the World Bank Report of 1997) and other multilateral institutions. The rationale for this has been in part that decentralization promotes accountability. It is not therefore surprising that by 1997, 62 of 75 developing nations had embarked on one form of decentralization or another.

Fiscal federalism in Ethiopia has been adopted within a unique political landscape of ethnic federalism. The TPLF-led government that replaced the Dergue has redrawn the political map of the country and adopted ethnic based federal structure of government. This experiment has been formalized in the 1994 Constitution. However, the constitutional provisions operate with political centralism that has remained to be the distinguishing feature of the current political system.

Fiscal federalism derives its nature and characteristics from constitutional provisions as well as the state of economic development, the pattern of income and resource distribution, and the institutional capacity of the system. The constitutional provisions define the framework within which decision-making would be exercised and establishes the vertical and horizontal structures that find meaning within the prevailing socio-economic environment of the system. The vertical structure defines the assignment of fiscal decision-making power between the federal and lower tiers of government. The horizontal structure outlines the nature of interaction across cross-sections of government levels. This aspect addresses how regional governments interact to each other especially when there are externalities and spillovers. The main economic rationale behind fiscal decentralization is improving efficiency of public resource utilization, creating enabling environment for private sector development and the growth of the national economy. The theory of fiscal federalism addresses three issues related to fiscal decision-making: assignment of responsibilities and functions between the federal government and the regional governments, the assignment of taxation power and the design of inter-governmental transfer (subsidy) of fiscal resources coupled with provisions about the borrowing windows to sub-national governments. These factors give rise to a third issue of the relative size of the public sector in the national economy. It is therefore the dynamics of these processes and public policy choices that ultimately shapes the performance of the fiscal sector and its impact on the national economy.

An important aspect of the exercise of fiscal federalism is the assignment of fiscal functions to the federal and the sub-national governments and the appropriate means of financing these responsibilities. The theory of fiscal federalism does not provide a clear-cut separation of fiscal responsibilities that would promote economic efficiency and resource distribution. The broad thrust of normative theory is that expenditure responsibilities in areas of macroeconomic stabilization and redistribution functions should remain within the domain of the federal government whereas allocation functions should be assigned to lower levels of government. The argument is based on the reasoning that lower levels of government have limited capacity and policy instruments to provide stabilization and redistribution functions. Due to the nature of the responsibilities, the federal government usually assumes macroeconomic stabilization and income redistribution functions and make sure that regional governments would not take measures that are not compatible with such functions. Moreover, there are functions such as national defense and foreign affairs that have national public good character and hence usually assigned to the central government.

Fiscal decentralization and the assignment of functions can generate economic efficiency of the public sector. If preferences are heterogeneous across jurisdictions, which is most likely the case, decentralized decision-making power as to the provision of local public goods and services improves efficiency by tailoring services to the preferences of the local population. The main argument is that local governments are closer to the local population and can identify their choice and preferences better than the central government. Accordingly, when the decision to provide a bundle of public goods is made by local officials and these officials are directly accountable to the local voters, there is an incentive for the local public officials to provide services that reflect the preferences of the local population. Moreover, as long as there is close relation between the benefits from public services and taxes on the local taxpayers, there is additional incentive to utilize resources efficiently and cost effectively. At least by implication, the theory recognizes the need for local authorities to exercise choice in the provision of public services that are of higher local demand instead of resorting to the unitary solution. The decentralization theorem suggests that, under such conditions, decentralization of fiscal decision-making can improve efficiency of the public sector and the welfare of the local population.

Once the allocation of expenditure responsibilities is conducted according to such broad principles, the fiscal system needs to address the issue of assigning taxing power that broadly identifies who should tax, where and what. The imposition of taxes, in the absence of lump-sum source of taxation, always involves a certain degree of economic inefficiency. In the context of fiscal federalism, the assignment process needs to identify the comparative efficiency and effectiveness of providing the fiscal instruments to the multi-tier decision-making centers so as to finance public functions and activities in the most efficient manner possible.

What kind of taxes should be assigned to the federal government and which should be assigned to the local governments? The theory and practice in the assignment of taxation power identifies the following main criteria in assignment process: taxes on mobile tax bases, redistributive taxes, taxes that could easily be exported to other jurisdictions, taxes on unevenly distributed tax bases, taxes that have large cyclical fluctuations, and taxes that involve considerable economies of scale in tax administration should be assigned to the national or federal government. There are efficiency and equity considerations behind such principle of tax assignment.

The assignment of taxing power between the federal and the regional governments and the provision for concurrent power to share establishes the basic link in which the behavior of one of the parties would influence the decision making power of the other and its effective tax base. There is a possibility for vertical tax externality that might require additional policy instruments to correct their effect on other levels of government. When there are clear cases in which vertical tax externalities are prevalent, the tension between the federal and the state governments would arise. This in turn would require mechanisms for the assignment of taxing power and revenue based on the nature and characteristics of the tax base.

The assignment of taxing power is a thorny issue in fiscal policy and its application is influenced by a number of considerations. First, despite the legislative assignment of taxes, the actual potency of the tax network depends on the nature and development of the national economy, the relative distribution of economic activities across jurisdictions, and the administrative efficiency of the taxation system. Second, the practice of fiscal federalism, especially when citizens across regions with diverse economic and demographic situations are treated unequally, gives rise to the violation of one of the core principles of horizontal fiscal equity. Moreover, fiscal decentralization might also potentially breach the principle of vertical fiscal equity by not treating taxpayers with different capacity to pay differently. Third, despite the monopoly of taxing power resides at the disposal of the government, the reach of the taxation network depends on the economic circumstances of the potential taxpayers.

The fiscal system of Ethiopia has historically been characterized by high centralization and concentration of fiscal decision-making power at the center. Moreover, the structure of the fiscal system shares important features with other underdeveloped economies in terms of reliance on indirect taxes, dependency on international trade taxes, and persistent fiscal deficits. The current fiscal system of Ethiopia features some departures from the previous systems and striking continuities in the structure and essential elements of fiscal performance of the economy. The main features of fiscal aggregates of Ethiopia suggest that either the government is not willing to fundamentally change its fiscal policy stance or the fiscal system is governed by the structural features of the economy that are not easily amenable to change in response to fiscal policy reforms. A closer examination of the main features of the fiscal system suggests that both factors play a role in the process. The nature and structure of the economy, the resulting tax bases, the excessive dependence on international trade taxes and external grants, and persistent deficits all contribute to the prevailing features of the fiscal sector as do the fiscal policy stance of the government.

For the period 1980/81-2001/02, the government on average extracted about 18 percent of GDP from the public and spent about 28 percent of GDP, of which recurrent spending took more than 19 percent and only 9 percent left for capital spending. This behavior of excessive spending left an average fiscal gap of about 10 percent. Foreigners provided about 3 percent as charity and lent about 4 percent of GDP and the rest was financed mainly from domestic banking system. A fiscal system that resorts to borrowing to cover about 36 percent of its spending appetite would sooner or later confront the consequence of its behavior. It is an important predictor of a looming crisis. This behavior of fiscal spending also affected the macroeconomic situation in which aggregate expenditure run in excess of domestic production. The country has become increasingly dependent on foreign aid and borrowing to finance its consumption and investment expenditure.

The fiscal system, nonetheless, witnessed important changes over time. Government revenue increased during the 1980s and reached a peak of 24.8 percent of GDP in 1988/89 before it declined drastically during the subsequent two years of political turmoil in the country. The fiscal regime was extremely coercive and led to distortions in resource allocation. The prohibitively high marginal tax rate had driven most activities underground and tax evasion and corruption were on the rise. Such a system was indeed unsustainable and the change in the political regime precipitates a collapse in the fiscal system. The decline in revenue was particularly severe from business profit taxes, export taxes and revenue from government investment income. The collection of government revenue collapsed from about a quarter of GDP to about 10.6 percent by 1991/92.

The transitional government introduced a number of fiscal and monetary policy reforms that had mixed implications on the revenue collection. The amendment in the tax codes, devaluation and gradual depreciation of the exchange rate, elimination of taxes on exports (except coffee duties), and the privatization process have had important implications on the amount and structure of government revenue. The average domestic revenue to GDP ratio has recovered gradually and for the period 1991/92 to 2001/02 the average reached about 17.2 percent with a gradual and yet increasing trend. The average tax revenue for the period was about 11.7 percent of GDP.

One typical feature of the tax structure is its narrow base. There is an increasing dependency on foreign trade, especially import, taxes in recent years. The devaluation of the currency and its subsequent depreciation over time somewhat expanded the domestic currency denominated tax base on imports. The tax revenue-to-GDP ratio for developing countries is about 18 percent and for African countries is about 20 percent. The ratio of tax revenue in GDP for advanced countries is significantly higher than developing countries, at about 38 percent, reflecting the state of economic development, the tax base and the efficiency of tax administration. This pattern could broadly be attributable to the structure and performance of the economy, the administration of the taxation system, and the design of the taxation system.

A longer view of the fiscal resource allocation behavior of the government, despite marginal changes in some aspects of the fiscal components, suggests that there has not been enduring and significant shift in policy over the past two or so decades. The current government in power, except some marginal changes, shares important characteristics and behavior in fiscal policy with its predecessor. The current regime spends about 26 percent of GDP and extracts from the public about 17 percent of GDP.

Foreigners still provide about 3 percent as grants and lend about 3.7 percent of GDP. The remainder of about 2.4 percent of GDP has been financed from domestic borrowing. The relative performance of the current fiscal regime shows some improvement and yet it still covers about 23 percent of its spending by borrowing. The result of such features of government revenue and expenditure has been the emergence of persistent fiscal deficits and the accumulation of public debt. Domestic government revenue apparently has been barely enough to cover recurrent government expenditure let alone to generate resources for financing capital expenditure. The level of deficit has increased so much so that in recent years it has been as much as the total tax revenue collection of the government. Such a stance of fiscal policy is unsustainable and the external grants, even if important to partially narrow the gap, would not and could not resolve the problem. The government has increased its appetite for borrowing from foreign sources to bridge the gap and when external borrowing does not satisfy it resorts quite easily to borrow from the domestic banking sector.

The fiscal performance of the country is reflections of a typical underdeveloped and agrarian based economy in which the majority of the population lives in chronic poverty and a government that devotes its effort to extraction of resources from the economy and failing to allocate these resources to priority areas and sectors of the economy. When this is coupled with a de facto fiscal centralization and stance of inefficient public resource allocation, it fails to address the priorities of the majority of the population and hence becomes increasingly unsustainable. However, both political imperatives and changes in the overall economic policy of the country opened the door for fiscal policy innovation.

As far as the current system of fiscal federalisms and division of revenues in Ethiopia goes, the FDRE Constitution provides that the Federal Government and the States all collect taxes and shall share revenue, taking the federal arrangement into account. By taking into consideration principles such as ownership of revenue, regional character of revenues sources, convenience for administration, population, and wealth distribution, sharing of revenue between the Federal Government and the State Governments serves the following purposes: enhancing the efficiency of the central and the regional governments so as to enable them to carry out their respective duties and responsibilities; helping the regional governments to develop their regions on their own initiatives; narrowing the existing gap in development and economic growth between the regions of the country; and encouraging common interest activities of the regions.

In sharing of revenues, taxes are grouped into three: central (that of the Federal Government), regional and joint. As far as collection of the revenues goes, the regional governments collect their own revenues whereas the Federal Government collects not only its own revenues but also the joint revenues, of course with a possibility of delegation whenever deemed necessary.

According to Article 96 of the FDRE Constitution the revenues of the Federal Government include customs duties, taxes and other charges levied on the importation and exportation of goods; income tax collected from employees of the Federal Government and international organizations; income, profit, sales and excise taxes collected from Federal Government owned enterprises; taxes collected from national lotteries and other games of chance; taxes collected from income generated through air, rail, and sea transport services; taxes collected from rent of houses and Federal Government owned properties; charges and fees on licenses issued and services rendered by the Federal Government; taxes on monopolies; and Federal stamp duties.

In a similar manner, Article 97 enumerates the revenue sources of the regional governments of the country as comprising of income taxes collected from employees of the States and of private enterprises; fees collected from land usufructuary rights; taxes collected from the income of private farmers and farmers incorporated in cooperative associations; profit and sales taxes collected from individual traders operating within state territories; taxes on income from water transportation within state territories; taxes collected from rent of houses and State Government owned properties; profit, sales, excise and income taxes collected from State owned enterprises; taxes on income, royalties, and land rentals from mining operations; charges and fees on licenses issued and services rendered by the State Governments; and royalties for use of forest resources.

Apart from these, there are certain revenue sources which are shared by the Federal and State governments. The joint revenues are listed in Article 98 of the FDRE Constitution as constituting profit, sales, excise and income taxes on enterprises jointly established by the Federal and State governments; profits of companies and dividends of shareholders; and income and royalties derived from large-scale mining operations and all petroleum and gas operations. For those powers of taxation which have not been explicitly stated in the provisions of the FDRE Constitution, such as value added tax, Article 99 clearly stipulates that the exercise of such powers is to be determined by a two-third majority vote in a joint session conducted by the House of Federation and the House of People’s Representatives, thus subjecting the exercise of this so-called “undesignated power” to strict requirements.

The exercise of the taxing powers of both the Federal and Regional governments has to take certain considerations into account. For one, both governments are required to ensure that any tax is related to the source of the revenue taxed and that it was determined per the proper procedures. Secondly, both governments are required to ensure that the relationship amongst themselves is not adversely affected by the tax and that the rate and amount of taxes are commensurate with the services that the taxes help deliver. Finally, both governments are prohibited from levying and collecting taxes on each other’s properties unless it is a profit-making enterprise.

The FDRE Constitution gives much power to the regional states. Collectively, the regional states are granted the status of a nation. They are given self-determination up to secession. Self-determination is broadly understood to mean as the use and development of one's language, culture, history and administrative structure. Beyond the "unrestricted right to administer itself", self-determination also includes proportional representation at federal organs. In order to resolve conflicting claims over representation, territory and resource, the constitution has created the House of Federation whose members are elected by State Councils. The ethnic groups are represented at this institute. This House is composed of "representatives of nations, nationalities and people" at least one for each of them, plus an additional member for nation or nationality for each one million of its population". Ethnical conflicts and boarder disputes are referred to the House of Federation. This body has the role of supreme interpretation of the constitution and resolving key question of the nationalities/ethnic groups.

The regional states have their respective autonomous governments set up. Accordingly, each regional government includes a State Council (the highest organ of state authority) and a State Administration (highest organ of executive power). The State Council is the highest political authority: it defines the region's policy and has all legislative, executive and judiciary powers regarding the region, except for those under the responsibility of the central government, such as defense, foreign affairs, economic policy etc. The State Council plans, approves, heads and controls economic and social development programs. It drafts, approves and manages the regional budget. The State Administration is the highest executive authority of regional government. It is elected by the State Council and includes 15 Executive Committee members. The State Administration enforces, as appropriate, the policies, proclamations, regulations, plans, guidelines and decisions of the central government and of the State Council. It manages, coordinates and supervises the activities of regional offices, zone administration offices and Weredas (district) offices. It drafts and submits economic and social projects to the State Council for approval, and manages the projects once they have been approved. It drafts the region's budget, submits it for approval to the State Council and manages the budget once approved.

At the broadest level, the general principle underlying the allocation of authority and legislative responsibility in federal systems has been that matters of common interest and concern to the country as a whole should be assigned to the federal government, and matters of a decidedly regional or local character should be assigned to the regional governments. In actual fact, however, there is a weak federal executive power whose relationship with the regional governments is not yet clearly coordinated. Constitutionally, the federal government is not effectively centralized through presidentialism. The president has a symbolic role. The federal executive power is vested in the Prime Minister and in the Council of Ministers which are politically accountable to the House of Peoples' Representatives in all the decisions it adopts. As enshrined in Article 77 of the Constitution, the Council of Ministers among others, ensures implementation of laws, and decisions adopted by the Federal Parliament, decided organizational structure of Ministries and other Federal Parliament, decided on organizational structures of Ministries and other organs of government responsible to it, coordinates the activities of organs of government, discusses and refers draft proclamations to the Lower House, and decides on the general socio-economic and political strategies the country should pursue.

State Councils of the regions are also responsible for appointment of the highest executives in charge of the various organs of State. The respective constitution of the various regional states stipulates that the State Councils are entrusted with the power of forming the Executive Committee, which is the highest state-level executive organ. State executive bodies are responsible for the execution of laws, policies and strategies falling within their jurisdiction. These include administering land and other natural resources in keeping with Federal laws, formulating and execution economic, social and development policies, strategies and plans of the state in question.

Consequently, health, security, and agricultural development and similar other matters seriously demand that the pertinent Federal and State executive organs work in close collaboration. There could be contexts where the common decisions of the two become vital to ensure maximum benefits in a particular area. But there is a weak exchange of information between the two levels. Under such circumstances, it is possible that the regional states can only issue and enforce their own laws not that of the federal government.

The most important factor which underlines the further autonomy of the regional states is the assigning of residual power. The Federal Constitution as stipulated in Article 52(1) states that "All powers not given expressly to the Federal Government alone, or concurrently to the Federal Government and States are reserved to the States". Accordingly, any residual power unspecified in the constitution is left for the States. It thus allocates residual authority to the constituent units. The significance of the residual power is that the regional states can exercise legislative power over matters not specified in the constitution.

The above three points suggest that the relationship between the federal government and the regional states is asymmetrical, even though they are in principle considered to be equal. Nonetheless, the financial and manpower resources of the regions are very limited. The revenue base of the regions is not that productive and expansive. Currently, they are dependent on federal fund, particularly for capital budget. They are not yet economically strong to claim that their laws supersede that of the federal law. According to the constitution, they are given all the power to develop their region.

As can be inferred from Sub-Article 7 of Article 62 of the FDRE Constitution, which enumerates the powers and functions of the House of Federation, there is a possibility by which the Federal Government may transfer revenue to the regional governments. Such a system of transfer payments or grants, by which a central government shares its revenues with lower levels of government, is an important aspect of the subject matter of ‘fiscal federalism’. The underlying rationale behind transfer of revenue is the existence of a fiscal gap at the sub-national level emanating from lack of locally generated own revenue to finance own expenditure; differences in the regions’ level of economic development and endowment with natural resources lead to the formation of a fiscal gap.

Federal governments use this power to enforce national rules and standards. Such transfers of revenues usually fall under three categories: conditional, unconditional and equalization grants. A conditional transfer from a federal body to a state, or other territory, involves a certain set of conditions. If the lower level of government is to receive this type of transfer, it must agree to the spending instructions of the federal government. The second type of grant, unconditional, is usually a cash or tax point transfer, with no spending instructions. Unconditional grants are usually general purpose grants aimed at addressing vertical imbalances. The third type of grant, equalization grant, is used to address horizontal imbalances between regional governments through the channeling of resources from the relatively wealthier regions to poorer ones; thereby equalizing the capacity of regional governments to provide a national standard level of goods and services.

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Ethiopia 2019

Executive summary.

  • The objective of the Public Expenditure and Financial Accountability (PEFA) assessments is to review the current performance of the public financial management (PFM) systems, processes, and institutions of the Federal Government of Ethiopia. The assessment aims to assist the government in identifying PFM weaknesses that may inhibit effective delivery of services to its citizens and the realization of its development objectives in general. Furthermore, the findings of the PEFA assessment will assist the government in refining the PFM Reform Strategy that it has already developed and provide the basis for a coherent PFM reform program that can be supported by development partners, as well as through the government’s own initiatives.
  • The Federal PEFA assessment covered federal government budgeted units, extra-budgetary units (EBUs), the Office of the Federal Auditor General (OFAG), and Parliament. Civil society organizations were also contacted to solicit their views on the general PFM environment, especially on issues relating to procurement and taxation. The list of stakeholders met is presented in Annex 3B.
  • The fiscal years (FYs) for the assessments are Ethiopian Calendar (EC) 2008, 2009, and 2010 (Gregorian Calendar [GC] FY2015/2016, 2016/2017, 2017/2018). The period covered for each of the 94 dimensions (summarized into 31 performance indicators [PIs]) depends on the dimension and is in accordance with the PEFA measurement framework. Some dimensions were measured at the time of assessment (November–December 2018 and February–March 2019) during the first and second field missions, respectively. The cut-off date was March 2019; the assessment reflects the status of PFM systems and processes as of that date. Other dimensions were assessed at the relevant period, which is the last completed fiscal year FY2017/2018, or FY2018/2019 for the last budget submitted to Parliament.
  • The assessment management framework, oversight, and quality assurance are summarized in Box 1.1 . The assessment was funded by the World Bank, Irish Aid, the U.K. Department for International Development (DFID), the European Union (EU), United Nations Children’s Fund (UNICEF), and UN Women. It was managed by the World Bank.

Impact of PFM systems on the main budgetary and fiscal outcomes

Aggregate fiscal discipline

  • The good rating of PI-1 (‘A’ score) provides a reasonable assurance of budget discipline at aggregate level; this was however negatively affected by budget reallocations across functional and economic classifications (PI-2 ‘D+’) within the last three completed fiscal years largely due to some socioeconomic (drought that affected 8.5 million Ethiopians) and political instability, necessitating rapid financial response. These challenges equally affected federal government revenue targets (PI-3 ‘D+’) especially in terms of the type of revenue generated against planned revenues. The revenue shortfalls however did not significantly affect payment of expenditure commitments (PI-22.1 ‘A’), indicating that the government took cognizance of its limitations in terms of revenues to spend within its available resources.
  • Another key element that affects fiscal discipline is the quantum of government resources that are outside the regular government budgeting and reporting system. Available evidence suggests that 5–10 percent of government expenditures and revenues are outside the budget and financial reports, but the government has ensured that these EBUs report on time to the central government (PI-6 ‘B’). In spite of this positive view, fiscal risk monitoring and reporting is weak (PI-10 ‘D’), thereby indicating a significant financial risk exposure for the government. The same could be said for public investment and asset management (PI-11 and PI-12, both scoring ‘D+’); weaknesses in public investment management (PIM) lead to misallocation of funds which affects fiscal discipline and asset management, indicating that the government lacks the ability to effectively monitor and safeguard its assets. Furthermore, the nonexistence of a medium-term perspective in expenditure budgeting (PI-16 ‘D+’) limits the government’s option to exercise a longer than one-year horizon for its policies and make resources available to execute those policies. That said, payroll management and control are reasonable (PI-23 ‘C+’), one key element that usually distorts the government budget and consequently has a negative impact on fiscal discipline; this is currently not the case.

Strategic allocation of resources

  • Strategic resource allocation is key to efficient service delivery. Macroeconomic and fiscal forecasting score well (PI-14 ‘B’), providing an indication of the government’s intention to allocate its scarce resources for the benefit of the ordinary citizen through improved service delivery. Whereas both the budget preparation process and the legislative scrutiny and approval of the annual budget are reasonable (PI-17 ‘B’ and PI-18 ‘B+’), providing reliable resource allocation for service delivery, the absence of a fiscal strategy—a policy document that outlines the government revenue and expenditure framework in terms of how it wants to generate revenue and for what expenditure—does not guarantee that the government could make resources available to fund its policies (PI-15 ‘D’). However, available resources are quite predictable (PI-21 ‘C+’) for budget institutions (BIs) for the execution of their mandate.
  • The classification of the budget (PI-4 ‘B’ good) indicates the traceability (and transparency) of government resources according to the government’s programmes; also, information provided in the budget documentation available to the public is reasonable (PI-5 ‘C’), although this could be improved further. Comprehensive expenditure plans and approval processes are not enough to render services; these must be backed by revenue generation, monitoring, and reporting. Both revenue management and accounting show signs of credibility and reasonableness (PI-19 ‘C+’ and PI-20 ‘C+’) to fund government expenditure. There are, however, weaknesses in in-year reporting of budget execution; information is not readily and timely available to the public.

Efficient use of resources for service delivery

  • Primary service delivery is not a prime function of the Federal Government of Ethiopia; nonetheless, tertiary facilities such as referral hospitals, colleges, and universities provide service to the public. Also, regional governments and woredas deliver primary service on behalf of the federal government with significant funding (earmarked grants from the federal government). Tertiary institutions develop medium-term and annual strategic plans with measurable performance indicators which are published. Furthermore, ‘Volume 2’ of the 2018/2019 federal government budget contains information on government policy objectives, planned performance outputs, and outcomes for all sectors. This is published on the Ministry of Finance (MoF) website (PI-8.1 ‘A’); however, the performance outcomes and outputs are not made public to allow citizens to judge the efficiency of tertiary service delivery as well as primary service delivery by regional governments and woredas (PI-8.2 ‘D’) even though evaluations of these performances are carried out each year. Information on resources to the regional and woreda levels where the service delivery units operate is collected and recorded by the Ministry of Health (MoH) and the Ministry of Education (MoE), disaggregated by source of funds. A report compiling the information is prepared at least annually, allowing citizens to track resource allocation. Efficient service delivery is negatively affected by the poor PIM framework (PI-11 ‘D+’) as most of the capital investment projects that are required to improve service delivery will not be adequately funded. The assessment also shows that those projects that were funded may be poorly managed (PI-12 ‘D+’).
  • Another fundamental element for efficient service delivery relates to effective procurement management. Available evidence shows a weak procurement complaint management mechanism in terms of its independence, lack of public access to important procurement information such as procurement plans and contract awards, and lack of comprehensive and complete procurement database—all these necessary for the private sector to adequately plan and take advantage of government procurement, thereby reducing unit cost of service delivery (PI-24 ‘D+’). Internal controls (PI-25 ‘B’) provide reasonable assurance of government financial management system for improved service delivery; nonetheless, weaknesses in internal audit (PI-26 ‘D+’, mainly due to delays referencing management response to internal audit findings) pose a threat to efficient service delivery. There is adequate segregation of duties with the financial management structure both in law and in practice (PI-27 ‘B’); this is key to ensure protection of scarce government resources. Whereas both external audit functions and legislative scrutiny of these reports are good (PI-30 ‘C+’ and PI-31 ‘B’), the continuous infractions by public officials and failure to fully implement audit and legislative recommendations are cause for serious concern, meaning scarce resources are wasted without any punishment.

Performance changes since the last assessment in 2015

  • On the basis of the 2011 method, between the 2015 and the 2018 assessments, there have been more deteriorations in performance (7) than improvements (3), as shown in Table 0.1. Fifteen indicators have remained unvaried and six are not comparable. Annex 4 gives the details of performance change since the 2015 assessment.

Table 0.1: Changes in the ratings since 2015 using the 2011 framework

Fiscal discipline

  • Aggregate fiscal discipline, though satisfactory, appears to have deteriorated when compared with the 2015 performance—PI-1 from ‘A’ in 2015 to ‘B’ in 2018, mainly due to almost 12 percent and 6 percent over-budgeting of capital expenditure in 2015/2016 and 2016/2017. The economic situation in the country affected the government’s ability to secure the projected loans to execute its policies, coupled with foreign currency challenges. There has been a sharp decline in performance of expenditure composition outturn (PI-2) mainly due to unutilized sector budget allocations which were reallocated as well as payments for unbudgeted customs duties for public entities’ imports; that said, the federal government continues to respect the use of contingency vote (below 1 percent of budget). Likewise, revenue outturn (PI-3) has deteriorated from ‘B’ in 2015 to ‘C’ in 2018 mainly due to low domestic tax revenue collection. The stock of expenditure arrears has remained unchanged in principle except that dimension (ii) appears to have been overrated in 2015; the current situation is that data on arrears are generated annually as against quarterly, as was described in 2015. Payroll controls (PI-18) have generally remained unchanged except that there is marginal improvement in dimension (i) as a result of the link between personnel and payroll database through the Integrated Financial Management Information System (IFMIS).
  • The timeliness and reliability of information on transfers to regional governments (PI-8.2) has improved from ‘B’ in 2015 to ‘A’ in 2018; nonetheless, there are significant delays in the release of actual cash to regional governments, thereby affecting primary service delivery. Resource allocation according to the originally planned government policy has been affected by the poor performance in expenditure composition outturn (PI-2) and the numerous numbers of in-year budget reallocations. There is also serious limitation on dissemination of information on resource allocation to sectors, thereby limiting transparency and accountability.

Efficient service delivery

  • Service delivery has been affected by the reallocation of sector budgets (PI-2); also, the frequency of in-year budget adjustments leaves much to be desired. Whereas there has been no change in cash management (PI-16), delays in the release of actual cash for payment of expenditure have contributed to inefficient service delivery even though primary service delivery is not the remit of the federal government. Nonetheless, some federal services such as referral hospitals and tertiary institutions have been affected. Weaknesses in public procurement remain unchanged; there are no reliable data to assess the extent to which a non-competitive procurement method is justified. Therefore, it is unclear whether services are delivered at an affordable cost.

Overview of ongoing and planned PFM reforms and main weaknesses identified

  • The Federal Government of Ethiopia is currently undertaking a PFM project with funding from the World Bank at a cost of US$33 million over a five-year period ending in April 2021, the main components of which are the following:
  • Component 1: Improving Expenditure Management and Information Systems
  • Component 2: Strengthening Accountability Institutions
  • Component 3: Project Management, Monitoring and Evaluation
  • Major achievements in terms of the ongoing PFM reforms include the following:
  • Under Component 1, the IFMIS rollout contract has been awarded and implementation is progressing steadily but with some challenges such as weak and insufficient technical capacity to provide technical support to IFMIS rollout and weak Internet connectivity. As of June 2018, IFMIS has been rolled out to 67 sites, with 47 successfully tested, and 25 out of the 47 handed over to the IFMIS Project Management Office (PMO). In all, 149 sites have been envisaged for IFMIS rollout; this means that 102 sites (149 less 47) are planned for completion by December 2019. There are plans to roll out the Integrated Budget and Expenditures ( IBEX) payroll module to all woredas by December 2019. Since June 2018, around 35 more branch sites have been added under IBEX (online version) with an overall coverage of a little over 98 percent. The training and capacity building of IBEX are also progressing, with more than 150 staff trained since June 2015.
  • Under Component 2, some progress has been made on e-Government Procurement (e-GP). These include the establishment of a technical committee on e-GP and the recruitment of a consultant for system upgrade based on recommendations from the technical committee. Also, 621 public servants have been trained on public procurement, including trainer-of-trainers, out of which 36 percent are female. Not much has been achieved with OFAG, except for negotiations on the terms of reference (TOR) for the recruitment of technical assistance to support and improve OFAG’s operations. Also, the development of the Accounting and Auditing Board of Ethiopia (AABE) is still in the early stages; there are vacant positions for board members, which retards the smooth implementation and approval of AABE’s decisions. While there has been support to the Federal and Regional Ethics and Anti-Corruption Commissions, there is little information in terms of progress achieved, to effectively report on progress made thus far.
  • Under Component 3, project management is still weak mainly due to inadequate staff to effectively provide monitoring and evaluation of the entire PFM reform program. It has therefore been recommended that additional short-term experts be recruited to fill the gap.
  • In addition to the major PFM project, a number of piecemeal parallel reforms are also ongoing, the main one includes the following:
  • DFID ’s Tax Transformation Programme (TTP) at a cost of GBP 35 million over a 4-year period starting 2019 and co-funding of the 2018 PEFA assessments.
  • The EU is co- funding the 2018 PEFA assessments. Until now, the EU’s PFM capacity development support was provided at a subnational level through its contribution to the Promoting Basic Services Multi-donor Program. In addition, the EU is increasingly using budget support for which the improvement of PFM systems is a precondition and also includes PFM disbursement-linked indicators. The EU budget support portfolio includes the following:
  • Budget Support Transport: EUR 138,000,000 + EUR 100,000,000 additional financing
  • Budget Support Health: EUR 115,000,000 + EUR 50,000,000 additional financing
  • Budget Support Jobs Compact: EUR 50,000,000
  • Budget Support in Climate Change: EUR 36,000,000
  • Finally, two PFM capacity development operations are in the pipeline:
  • EUR 2,270,000 grant to the MoF
  • EUR 10,000,000 to be formulated in 2019, expected to be operational in 2020, and covering revenue and expenditures
  • Irish Aid is also co-funding the 2018 PEFA assessments. Irish Aid works with the Government of Ethiopia in different sectors and currently is designing its next country strategy paper.
  • UN Women. In September 2018, UN Women funded and technically guided the study on the ‘Gender Gap Analysis of the PFM System in Ethiopia’ in partnership with the MoF Gender Directorate—mainly bringing out the gaps that hinder gender responsiveness of the PFM system in Ethiopia and making recommendations for further actions. It is also co-funding the 2018 PEFA assessments.
  • UNICEF is co -funding the 2018 PEFA assessments. It also provides technical support and capacity building to the MoF on PFM studies.
  • The International Monetary Fund (IMF) is providing technical support for the macro-fiscal forecasting for the MoF. The World Bank, DFID, and IMF are supporting the government on fiscal risk reporting, public-private partnerships (PPPs), and PIM.
  • As a medium- to long-term view, the federal government has developed a PFM Reform Strategy covering 2018–2022, linked to the national medium-term development plan Growth and Transformation Plan 2015/16–2019/20 (GTP II), with an estimated cost of ETB 5.34 billion. Though this is laudable, a number of weaknesses have been identified referencing the reform strategy. Key among them include, but are not limited to, the following:
  • Exclusion of support to the external oversight functions, namely OFAG and Parliament
  • Exclusion of support to revenue administration, absence of a clear sequencing and prioritization framework, and weak PFM reform monitoring framework
  • Other weaknesses identified in the entire PFM system are inadequate technical and human capacity, delays in the rollout of IFMIS and inadequate training on IFMIS, and internal control and procurement weaknesses.

PEFA Partners

European Commission

  • St. Mary's University Institutional Repository
  • Mizan Law Review

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The Movement for Community-led Development

The Movement for Community-led Development

revenue assignment in ethiopia

Fiscal Decentralization in Ethiopia

Legal and Constitutional Framework

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Devolution of power, responsibilities, and resources from central to local governments has been the foundation of decentralization reforms in developing countries like Ethiopia. The  1995 Federal Constitution  is the basic document that lays out the legal and institutional framework for decentralization in Ethiopia. The decentralization reforms focus on strengthening local governments as institutions of democratic governance and efficient service delivery. It also outlined the respective spheres of authority and responsibilities of the Federal Government and the Regional States  1 . Since then, Ethiopia has been enjoying the   federal and decentralized system  of the ethnic-based federal governance structure. The country follows a federal system where the government power is divided between central government and nine regional states of governments as well as two special administrative cities. The regions are divided into zones, woredas/urban administrations, and kebeles (village areas, with an average population of 5,000) creating a four-tier level of government. The city administrations of Addis Ababa and Dire Dawa have different structures but are considered equivalent to regions  2 .

The Federal and Regional constitutions, as well as the subsequent proclamations, delineate different expenditure and revenue assignments to the federal and sub-national level of governments. Thus, the principles of fiscal decentralization, which is emanated from federal and regional constitutions, devolve fiscal decision-making power to lower tiers of governments, minimize vertical fiscal imbalances and provide complementary resources for effective and efficient delivery of public services. The government also attempted to introduce decentralization to reflect expenditure and revenue assignments and overseeing mechanism at the district level. Thus, in Ethiopia, two waves of fiscal decentralization have been in place, one from the federal government to regional states and the other reform regional states to Woredas with the view of revitalizing the Regional constitutional mandate for Woredas  3 .

The prime legal basis for fiscal decentralization is the 1995 constitution, Article 97 & 52 which provides autonomy for revenue and expenditure responsibilities to Regional states respectively. Article 62 indicates the prevalence of budget subsidy and hence the approval of budget subsidy formula by the House of Federations. Article 94 states the need for providing loan and assistance to support regions and areas. The proclamation No. 33/1992 enacted through Ministry of Finance and Economic Development (MOFED) is the other legal document that describes the expenditure responsibilities of the subnational governments (SNGs)  4 .

The fiscal decentralization strategy in Fiscal Year elucidates the landscape for the general and specific grant to different tiers of government. It incorporates the principles governing fiscal decentralization, i.e., to devolve fiscal decision making power to lower tiers of governments, minimize fiscal gaps and provide the complementary resource for effective and efficient delivery of services. In addition to this line, the specific objectives of fiscal decentralization in Ethiopia are also mentioned as follows  5.

  • To devolve fiscal decision-making power to lower tiers of government.
  • To enable regional and Woreda governments/administrations provide standard services in accordance with their functional assignments
  • To narrow the horizontal fiscal gap and ensure horizontal equalization
  • To promote efficiency in the allocation of financial resources.
  • To maintain consistency between macroeconomic stability and fiscal decentralization.

Fiscal Decentralization

The Ethiopian government fiscal year starts on 8th July and ends on 7th July. Both Ethiopian calendar and fiscal years fall in two Gregorian calendar years. The parliament approved  $13.9  billion budget for the financial year 2017/18, the amount represents an increase of nearly 17 percent on the previous year keeping up with the trend of ever expansionary fiscal policy. Of the total, $4.9 billions are allocated for capital expenditures while $3.55 billions are stated for regular expenses including administrative, economic and social services  1 .

The allocation of budget for the nation’s development reckons national development priorities and the corresponding implementation capacity of various sectors and projects on the basis of   the Second Growth and Transformation Plan (GTP II) . This includes institutions and projects that are integral to the national economy such as ministries, agencies, commissions, and departments as well as major mega projects that hinge on promoting the country’s industrialization.

Based on the propositions by the House of Federation (HOF), 36.6% of the allocated budget was redirected as subsidy grants to the nine decentralized regional states and two city administrations. The HOF considers the revenue potential and expenditure needs of the regional states, thus Oromia is entitled to $1.44 billion out of $4.2 billion subsidy fund followed by the Amhara and southern (SNNPR) regional states each securing a check for $906.3 million and $843.5 million respectively. Somali Regional state is the next biggest earner $418.6 million followed by the Tigray regional state $252.9 million, Afar region $126.6 million, Benishangul $76.5 million, Addis Ababa $59.4 million, Gambella $55.9 million, Dire Dawa $37 million and Harari $31.9 million 1 .

Apart from the subsidy grant, the government allocated a total of $254 million to support regional states in their effort to meet the Sustainable Development Goals (SDGs). Oromia received $87.4 million from the support for SDGs fund while Amhara got $54.8 billion, south $51.2, Somali $25.3 million and so on. The combined budget dedicated to regions under the subsidy and support for SDG categories is about 38.7 percent of the overall budget while the others (recurrent and capital) accounting for 25.5 and 36.5 percent each.  

Priority projects

In keeping with the overall aims of the second Growth and Transformation Programme (GTP II), budget spending is targeted at a number of areas, including industrial development (notably textiles, chemicals, and agro‑processing), which would increase the value of exports; and education, so as to adapt the population for an increasingly industrialised economy.

In terms of its sectoral distribution, about 61.8% of the budget is assigned mainly to finance infrastructure developments such as road, education, agriculture, water, health and rural electrification projects. Large sections of the budget will be spent on manufacturing, export and urban development, with the specific intention of transforming the economy sustainably.  The education sector gets the significant amount on the top of the budget, $1.6 billion. Agriculture and defense are the institutions receiving another biggest budget in the fiscal year, $435 million each.

On the revenue side, the government aims to collect nearly $8 billion domestic revenue from taxes and non-tax sources in the fiscal year. The government also expects to secure $1.65 billion from foreign assistance, loan and/or credit. Despite the uncertainties associated with the ongoing political instability and El Nino effect, the government expects to maintain the two-digit GDP growth in the fiscal year.

World Bank. (2010, August) Ethiopia Public Finance Review. Retrieved from   http://documents.worldbank.org/curated/en/530241468255278847/Ethiopia-Public-finance-review-2010

Assefa, D. (2015) Fiscal Decentralization in Ethiopia: Achievements and Challenges. Retrieved from    http://www.iiste.org/Journals/index.php/PPAR/article/viewFile/24944/25547

Ethiopia. (2017) Ministry of Finance and Economic Development. Fiscal Year Budget Retrieved from http://www.mofed.gov.et/

Asrat, S. (2017, June 17) Budget Breakdown.  Retrieved from https://www.thereporterethiopia.com/content/budget-breakdown

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Intergovernmental fiscal transfers in ethiopia: challenges and some options (a comparative study).

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It is a boldly held view that the revenue assignment problem in a federal set up is less challenging than problems witnessed in intergovernmental fiscal transfers from the federal to state governments. The issue of challenges to intergovernmental transfer system and possible alternatives of avoiding them did not, however, attract much attention in Ethiopia as they deserve. This paper is then especially targeted to fill the gap in that regard. 

The paper argues that the prevalent vertical fiscal imbalance of the states in Ethiopia could not only be rectified through fiscal transfers and we should sought some other options to empower the fiscal capacity of the states such as bridging the gap between revenue potential and actual revenue of the states, revisiting the FDRE constitution (including the concurrent jurisdiction) to win more tax jurisdictions to the states, and enhancing their role at least in revenue sources exclusively assigned to them.

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Intergovernmental Fiscal Transfers in Ethiopia: Challenges and Some Options (A Comparative Study)

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Comments .1 Regional Governments Expenditure Finance from Own Revenue (2006/07 F/Y) It is now almost two decades since the federal structure is set up in Ethiopia by the adoption of the Transitional Charter in 1991 and the subsequent ratification of the Federal Democratic

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  1. GDP Growth and Public Finance in Ethiopia: FY2019/20

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  2. 4: Tax revenue and total revenue in Ethiopia (in percent)

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  3. Ethiopian Ministry of Revenues reports that it has collected more than

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  4. Nation Collects Close to 234 Billion Birr Annual Revenue

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  5. (PDF) DETERMINANTS OF TAX REVENUE IN ETHIOPIA COLLEGE OF BUSINESS AND

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  6. 4: Tax revenue and total revenue in Ethiopia (in percent)

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  3. Ethiopia

  4. ተቀናሽ የሆኑ እና ያልሆኑ ወጪዎች|Tax in Ethiopia |Withholding tax| VAT| TOT| Ministry of Revenue| Part One

  5. Ethiopia

  6. Info trade ethiopia(መረጃ ንግድ) #ethio info trade #shorts #short

COMMENTS

  1. Income tax assignment under the Ethiopian Constitution: issues ...

    The revenue provisions of the Ethiopian Constitution are striking on a number of levels. By and large, the revenue provisions do not evince conformity with what the theories of fiscal federalism generally prescribe in the area of assignment of revenue powers.

  2. Introduction to Fiscal Federalism and Division of Revenues under the

    The theory of fiscal federalism addresses three issues related to fiscal decision-making: assignment of responsibilities and functions between the federal government and the regional governments, the assignment of taxation power and the design of inter-governmental transfer (subsidy) of fiscal resources coupled with provisions about the borrowin...

  3. Income Tax Assignment under the Ethiopian Constitution: Issues to Worry

    The revenue provisions of the Ethiopian Constitution are striking on a number of levels. By and large, the revenue provisions do not evince conformity with what the theories of fiscal federalism generally prescribe in the area of assignment of revenue powers.

  4. Measuring and explaining fiscal de ...

    The assignment of taxing powers in Ethiopia is broadly in line with the conventional fiscal federalism theory that prescribes the assignment of redistributive, ... Regional own-source revenue in Ethiopia is greater than that of subnational units in Uganda (5%), Kenya (10%), Nigeria (15%), and South Africa (20%) (Hobdari et al., 2018, p. 23).

  5. The practice of fiscal decentralization at local level in Ethiopia

    With regarding to the revenue assignment, Regional governments are delegated responsibility to collect revenue on certain revenue sources to their respective local governments. ... District Level Decentralization in Ethiopia: Expenditure Assignment and Fiscal Transfer. In G. E. Tegegne & M. P. Van Dijk (Eds.), Issues and Challenges in Local and ...

  6. 20 Ethiopia in: Fiscal Federalism in Theory and Practice

    The revenue assignment of the state governments is concentrated in direct tax revenue, including most personal income taxes; however, there is no historical evidence in Ethiopia of sustained growth of these taxes. ... Ethiopia: Revenue Sharing Between the Federal and State Governments. Sources: Ethiopian Government Proclamation 33/1992; and ...

  7. The Assignment of Revenues and Expenditures in ...

    A variety of methods of revenue assignment can be distinguished. They differ in degree of autonomy provided to subnational governments, ease of administration, fairness and neutrality, and the degree of inter-jurisdictional redistribution they accommodate. They include:

  8. PDF System of Division of Revenue in Ethiopia

    In general, the division of revenue raising power in Ethiopia is mainly structured according to the categories of taxpayers or particular things as a source of revenue. The exclusive domain of each government is not the tax base but the tax source.

  9. Ethiopia 2019

    of 206 Executive summary The objective of the Public Expenditure and Financial Accountability (PEFA) assessments is to review the current performance of the public financial management (PFM) systems, processes, and institutions of the Federal Government of Ethiopia.

  10. Income tax assignment under the Ethiopian ...

    The revenue provisions of the Ethiopian Constitution are striking on a number of levels. By and large, the revenue provisions do not evince conformity with what the theories of fiscal federalism generally prescribe in the area of assignment of revenue powers.

  11. PDF Fiscal Decentralization in Ethiopia: Achievements and Challenges

    Ethiopia since 2002 with reference to federal-regional interface and regions-woreda context. 2. ... Revenue Assignment: This considers which level of government should tax what (the tax base) and how including the type of non-tax revenue sources. The purpose of revenue assignment is to provide sub-

  12. Taxation in Ethiopia

    Over 20% of all tax revenue in Ethiopia is derived from business profit tax, and 62% of all direct taxes consist of business taxation. [7] Tax burden in Ethiopia has been shown to fall unequally among firm sizes; a study from 2019 found that "small firms face the highest tax burden, the largest firms still pay more than middle‐sized firms do ...

  13. Factors Affecting Tax Revenue in Ethiopia: Autoregressive Distributed

    Tax revenue is the key source of revenue for governments in both advanced and emerging countries regarding funding public spending. The main goal of this research is to look at the factors affecting tax revenue in Ethiopia from 1996 to 2020 using time series data. The impact of agricultural GDP, service-to-GDP, inflation, corruption, political ...

  14. PDF Inter-Governmental Fiscal Transfers in Ethiopia

    It is a boldly held view that the revenue assignment problem in a federal set up is less challenging than problems witnessed in intergovernmental fiscal transfers from the federal to state governments. The issue of challenges to intergovernmental transfer system and ... Ethiopia is among such countries where one can observe huge

  15. 4 1 Mizan, 31-51

    The assignment of income tax powers is a good example of the specificity of the Ethiopian Constitution. What the revenue provisions of the Ethiopian Constitution did was to divide the different income tax sources into smaller slices and share them between the federal government and the regional governments.

  16. (PDF) Tax Revenue Collection in Ethiopia: Does ...

    Ethiopia's tax-to-GDP ratio is low compared to the average tax revenue of African countries (16.3 percent) and Sub -Saharan African c ountries (10.2%). For exam ple, in Ethiopia, the tax

  17. St. Mary's University Institutional Repository: Vol 4. No 1 INCOME TAX

    Income tax, Ethiopian Constitution, fiscal federalism, revenue assignment,global income tax, schedular income tax: Issue Date: Mar-2010: Publisher: ... was motivated by the desire to divide the power of taxation over existing taxes in Ethiopia rather than to reinvent the wheel. However, there might be a tension between the formula the ...

  18. PDF ETHIOPIA Ethiopia Local Government Revenue Study

    Table 4.2. Revenue profile for Ethiopia (actual revenue collections, EFY 2004) .....26 Table 4.3. State and municipal revenue collections by regional state (EFY 2004, ETB mn) .....28 Table 4.4. State and municipal revenue collections by regional state (EFY 2004, ETB per capita) .30

  19. Fiscal Decentralization in Ethiopia

    The government also attempted to introduce decentralization to reflect expenditure and revenue assignments and overseeing mechanism at the district level. Thus, in Ethiopia, two waves of fiscal decentralization have been in place, one from the federal government to regional states and the other reform regional states to Woredas with the view of ...

  20. Intergovernmental fiscal transfers in Ethiopia: challenges and ...

    It is a boldly held view that the revenue assignment problem in a federal set up is less challenging than problems witnessed in intergovernmental fiscal transfers from the federal to state governments.

  21. Chapter 4 pf

    Chapter- Ethiopian Tax System Taxable income (under direct taxes) is categorized into four schedules A, B, C and D. Employment income is categorized as Schedule A income, Rental as Schedule B income, Business income as Schedule C income, and All other direct taxes together as Schedule D income.

  22. Expenditure Assignment In Ethiopia

    1 Expenditure Assignment In Ethiopia Kendal snicks her full-length prematurely, she tepefies it amiably. Objurgative Robb pop-up distantly. Forrester rabbits hourlong as wizard Ike poach her Schopenhauer interfered andantino. 2 Half of expenditure in ethiopia seem to avoid unnecessary expenditure has tries to subnational governments regarding to tax revenue

  23. (PDF) Intergovernmental Fiscal Transfers in Ethiopia: Challenges and

    Intergovernmental Fiscal Transfers in Ethiopia: Challenges and Some Options (A Comparative Study) ... It will posit that fiscal federalism is a particular pattern of constitutional division of revenue powers and responsibilities among levels of government. ... the pattern of assignment of responsibilities by the constitution among federating ...