The Ethiopian Revenues and Customs Authority (ERCA) is the body
responsible for collecting revenue from customs duties and domestic
taxes. In addition to raising revenue, the ERCA is responsible to
protect the society from adverse effects of smuggling. It seizes and
takes legal action on the people and vehicles involved in the act of
smuggling while it facilitates the legitimate movement of goods and
people across the border. The ERCA traces its origin to July 7, 2008 as a
result of the merger of the Ministry of Revenues, the Ethiopian Customs
Authority and the Federal Inland Revenues into one giant organization.
The pre-merger study proposal
The pre-merger study proposal
The pre-merger study (Business Process Reengineering) proposal
A study called "Business Process Reengineering" took place before any steps were
taken to effect the merger of the foregoing administrations. The study was
undertaken for a year and half beginning from November 2007 by teams of
officials selected from within the administration. The study has looked into the
selected key business processes and identified inefficient organizational structure
and unnecessary complicated procedures that permitted insufficient service
delivery. The study also identified that there was corruption within the
administrations and that smuggling and tax evasion were serious problems. These
problems have thwarted the attempt of the administrations to be successful in
achieving their objectives. Owing to the depressing problems that worked against
efficiency, the former administration has failed to deliver efficient service to its
customers such as importers, exporters, taxpayers, the federal government, the
society etc. For instance, international trade participants (importers, exporters)
were unable to deliver their goods to domestic and international market on time.
Every import or export goods and their documents must be processed through the
former tax and customs administration and due to the inefficient procedures these
goods were subject to delay at exit or entry points of the former customs
Authority. Owing to it, importers or exporters viewed the former customs
procedure with disfavor or as an impediment that blocked the movement of
international trade. The former tax and customs administration also has long been
criticized for lack of efficient system to control tax evasion. The administration
had inefficient system to control taxpayers who fail to declare their actual income
in order to reduce their tax bill and the federal government’s revenue. The former
administration was also far behind in protecting investors from adverse effects of
contraband. It was a daily occurrence to see contraband goods displayed on and
being sold in the streets of major towns of the country. These and other myriad
problems call for solutions or significant change and in response to them, the study
team has made problem-solving proposal.
In its proposal, the team suggested merger of the above-mentioned three
institutions. The team could not see the necessity of three entities or
administrations as long as their main purpose is indistinguishable i.e. collecting
tax revenue for the government and preventing tax evasion. The study team
believed that it would be better if the three administrations merged, forming a
single large powerful organization so that the base for modern and equitable tax
and customs administration system, effective resource utilization and quick service
delivery could be laid down. The merger was eventually put into effect with the
knowledge, participation and approval of the employees and senior management
members and taxpayers.
Background
According to article 3 of
the proclamation No .587/2008, the Authority is looked upon as
"an autonomous federal agency having its own legal personality". The
Authority came into existence on 14 July 2008, by the merger of the
Ministry of Revenue, Ethiopian Customs Authority and The Federal
Inland Revenue Authority who formerly were responsible to raise
revenue for the Federal government and to prevent contraband. Reasons
for the merge of the foregoing administrations into a single autonomous
Authority are varied and complex.
More
Some of those reasons include:
To provide the basis for modern tax and customs administrations
To cut through the red tape or avoid unnecessary and redundant
procedures that results delay and are considered cost-inefficient
etc.
To be much more effective and efficient in keeping and utilizing
information, promoting law and order,resource utilization and service
delivery
To transform the efficiency of the revenue sector to a high level.
A long process of study called "Business Process Reengineering"
had taken place before any steps were taken to effect the
merger of the foregoing administrations. The study was
undertaken for a year and half beginning from November 2007
by teams of officials selected from within the administration.
The study has looked into the selected key business processes
and has come across inefficient organizational structure
and unnecessary complicated procedures that permitted
insufficient service delivery. The study has also indicated that there
was corruption within the administrations and that smuggling
and tax evasion were serious problems. These problems have
depressed the attempt of the foregoing administrations to
be successful in achieving their objectives. Owing to the
depressing problems that worked against efficiency, the former
administration has failed to deliver efficient service to
its customers such as importers, exporters, taxpayers, the
federal government, the society etc. For instance, international
trade participants (importers, exporters) were unable to deliver
their goods to domestic and international market on time.
Every import or export goods and their documents must
be processed through the former tax and customs
administration and due to the inefficient procedures, these
goods were subject to delay at exit or entry points of the former
customs Authority. Owing to it, importers or exporters
viewed the former customs procedure with disfavor or as an
impediment that blocked the movement of international
trade. The former tax and customs administration also has
long been criticized for lack of efficient system to control tax
evasion.
The administration had inefficient system to control taxpayers
who fail to declare their actual income in order to reduce their
tax bill and the federal government’s revenue. The former
administration was also far behind in protecting investors from
adverse effects of contraband. It was a daily occurrence to see
contraband goods displayed on and being sold in the streets of
major towns of the country. These and other myriad problems call
for solutions or significant change and in response to them, the
study team has made problem-solving proposal.
In its proposal, the team has suggested merger of the
foregoing three administrations. The team could not see the necessity
for three entities or administrations as long as their purposes are
indistinguishable i.e. collecting tax for the government and preventing
smuggling. The study team believes that it would be better if the
three administrations merged, forming a single large powerful
organization so that a base for modern and equitable tax and customs
administration system, effective resource utilization and quick
service delivery can be laid down. The merge was eventually put
into effect with the knowledge, participation and approval of the
employee and senior management members and taxpayers. The pre-merger
project such as the pilot program, carried out for six months
beginning from November 2008, has revealed that all the newly designed
tax and customs procedures test have been carried out to everyone's
satisfaction i.e. it was successful and has produced very beneficial
effects to both the authority and its customers or stakeholders.
Presently, the Authority is exercising the powers and duties that were
granted to the Federal Inland Revenue Authority and the Customs
Authority by other existing laws.
Objective of Authority
The ERCA has the following objectives:
To establish modern revenue assessment and collection system; and
provide customers with equitable, efficient and quality service,
To cause taxpayers voluntarily discharge their tax obligations,
To enforce tax and customs laws by preventing and controlling contraband as well as tax fraud and evasion,
To collect timely and effectively tax revenues generated by the economy;
To provide the necessary support to regions with a view to harmonizing federal and regional tax administration systems.
Vission, Mission and values
Vision -
To be a leading, fair and modern Tax and Customs Administration in
Africa by 2020 that will finance Government expenditure through
domestic tax revenue collection.
Mission -
ERCA will contribute to economic development and social welfare by
developing a modern Tax and Customs Administration that employs
professional and highly skilled staff who promote voluntary compliance
amongst individuals and businesses, and take swift action against
those who do not comply.
Values -
ERCA will understand its customers and their needs, treat them with
trust and respect and help them meet their obligations. We will act
with integrity, transparency and professionalism, and enforce customs
and tax related laws. We will work closely with stakeholders and ensure
the participation of women.
Business Drives
The key business drivers have been identified as follows:
Revenue collection
Reliable data and statistics
Trade facilitation
Process oriented management
Enforcement and security
Good governance
Power and Duties of Authority
The ERCA shall have the powers and duties to:
establish and implement modern revenue assessment and collection system;
provide, based on rules of transparency and accountability,
efficient, equitable and quality service within the sector; properly
enforce incentives of tax exemptions given to investors and ensure that
such incentives are used for the intended purposes;
implement awareness creation programs to promote a culture of
voluntary compliance of taxpayers in the discharge of their tax
obligations;
carry out valuation of goods for the purpose of tax assessment and determine and collect the taxes;
conduct study and research activities with greater emphasis to
improve the enforcement of customs and tax laws, regulations and
directives and the collection of other revenues; and based on the
result of the study and research initiate laws and policies and
implement the same up on approval;
collect and analyze information necessary for the control of
import and export goods and the assessment and determination of taxes;
compile statistical data on criminal offences relating to the sector,
and disseminate the information to others as may be necessary;
More
organize a training center wherein to build employees’ capacity; and design appropriate training schemes;
examine goods and means of transport entering into or departing
from Ethiopia through customs ports, frontier posts and other customs
stations, and ensure that customs formalities are complied with;
provide information and appropriate support to the Federal Police
in the control of illicit trafficking of goods and combating
contraband; and cause appropriate actions be taken in accordance with
the law;
investigate customs and tax offences, institute and follow up
criminal proceedings in courts; for the discharge of such
responsibilities, organize its own prosecution and investigation units
and supervise their performance ;
inspect and seize documents under the possession of any person
that are required for the enforcement of customs and tax laws; organize
and operate modern laboratory inspection of goods and documents;
decide the place where import and export goods are to be
deposited; establish warehouses, issue warehouse licenses; supervise
duty-free shops; control the handling and care of deposited goods;
suspend or revoke warehouse licenses;
collect license and service charges;
delegate, fully or partially, its powers of investigation,
prosecution, prevention and control of customs and tax offences as well
as tax assessment, collection and execution powers to justice
departments and revenue collecting agencies of regional states; and
provide the necessary support for and follow up its implementation;
oversee and supervise the activities of the National Lottery Administration;
provide appropriate capacity building support to regional revenue
collecting agencies with a view to harmonizing federal and regional
tax administration systems;
enter into contracts and international agreements regarding tax and customs administration;
exercise the powers and duties that were granted to the Federal
Inland Revenue Authority and the Customs Authority by other existing
laws;
own property, enter into contracts, sue and be sued in its own name;
perform such other related activities as required for the attainment of its objectives.
Organizational Structure and Manpower
The ERCA has its headquarters in
Addis Ababa. It is led by a Director General who reports to the Prime
Minister and is assisted by five Deputy Director Generals, namely
D/Director General for Program Designing of Operation and Development
Businesses; D/Director General for Branch offices’ Coordination and
Support; D/Director General of Enforcement Division; D/Director
General, Corporate Functions Division; Change Management and Support
Sector; and Enforcement Sector. Each deputy director general oversees
at least four directorates. Both the Director General and the
Deputies are appointed by the Prime Minister.
Directorates at the head office level
The ERCA, at the headquarters level, has 23 directorates, (see 23 Business_Processes)
. One for the list of the directorates. As shown on the
organizational chart, the directorates report to the deputy director
generals and a director heads each of them. Law Enforcement Directorate
is just one of the directorates ERCA has.
To carry out its duties, the directorate is
entrusted with broad powers. It investigates customs and tax
offences, institute and follow up criminal proceedings in courts and
this has resulted in the arrest and trials of hundreds of offenders
and smugglers. The directorate works in close collaboration with the
federal police to prevent criminal offences committed in violation of
customs and tax laws.
Besides, the headquarters has the office of the director general
which is led by a director and comprisesthree positions, namely Tax
and Customs Affairs, Strategic Intelligence Affairs, and
Communication and Human Resource Development Affairs.
Branch offices
Apart from the
foregoing directorates, the ERCA has 32 field offices, of which two
of them are coordination offices located outside of Ethiopia at the
port of Djibouti and at the port of Burbera, Somalia. The primary
function of the foregoing coordination offices are affording/
providing transit service for the goods imported into or exported
from the country. However, the latter coordination office is
presently not operational. The 30 branch offices in Ethiopia comprise
22 Customs Control stations, 50 Checkpoints and 153 Tax Centers.
Tax Center means a tax collection station administered under a branch
office and located in the vicinity of taxpayers while Customs
Control Station means a station administered under a branch office
where customs formalities are complied with and collection of taxes
and duties take place on imported and exported goods; checkpoint is a
place where customs examination is conducted by machine and/or
manually for the purpose of ascertaining that there is no variation
between the goods to be imported-exported and the goods specified in
the customs declaration.
Each branch office is directed by a manager who is accountable to the
D/Director General for Branch offices’ Coordination and Support
Sector. For the list of branch offices see (see Branch Offices) .
Manpower and Budget
Up to June 2011,
the ERCA has about 6095 employees and its
workforce is projected to rise to 12,000 in the future. Until June
2011, the ERCA’s annual operating budget is 458 million birr and is
appropriated by Ministry of Finance and Economic Development.
Since
2006, great strides in automating ERCA’s operations had been made,
hence ERCA’s daily operation has become improved and service delivery
to importers, exporters, taxpayers and other customers has become a
lot easier. The ERCA has witnessed success in revenue collection over
the past five years beginning from 2006. During this period, the
ERCA has tripled revenue collection from 11.2 billion birr in 2006 to
35.6 billion birr in 2010. Consequently the contribution of the
revenue to covering the federal government’s expenditure had
considerably grown from 37.54 percent in 2006 to 55.35 percent in 2010.
In this article, we are going to discuss the automated operation in
ERCA and the benefits both ERCA and its customers obtained.
Automating foreign trade procedures
Thanks to
Automated System for Customs Data (ASYCUDA), ERCA has automated most
of its foreign trade procedures carried out both at the head office
and branch offices level. The system came into operation in the year
1998 and has accelerated customs clearance and simplified procedures
through computerization. This cuts costs of businesses and shortens
the time it takes to process goods or has helped importers to receive
their goods quicker.
ERCA has managed to collect more revenue and to compile reliable and
timely statistical information which enables government agencies to
take politically and economically important decisions in the light of
the most recent trade development.
The automation of ERCA’s operations has also opened the
door to the eventual exchange of cargo data and goods
declaration by electronic means, thereby preventing traders
from shuttling back and forth to the various offices concerned
and thus has further facilitated trade.
ERCA succeeded in implementing ASYCUDA with the assistance of UNCTAD.
Automating the examination of import-export cargo
ERCA examines
import-export cargo to verify whether the details declared on the
customs declaration are actually in conformity with the goods that
are imported or exported. To speed up the examination of the goods,
ERCA uses scanning machine at Millay check point and at the Addis
Ababa Airport Customs branch office. This has enabled ERCA to detect a
wide variety of illegal goods concealed in the import-export cargo,
to safeguard revenue and to meet the social obligations to protect the
society while facilitating legitimate trade. ERCA has recently
installed scanning machine at various branch offices including
Gallafi Checkpoint, Moyallay Checkpoint and Metema Checkpoint. The
newly installed scanning machines are expected to be fully operational
soon.
Automating the Administration of Domestic Taxes
ERCA has equipped
itself with a computer system to administer almost all domestic taxes
including: Value Add Tax (VAT), Turnover Tax, Withholding Tax and
others. The computer system that enables ERCA to administer the taxes
mentioned above is called Standard Integrated Government Tax
Administration System (SIGTAS). The system allows ERCA to
administer all aspects of most domestic taxes including:
registration, assessment, cashing, and auditing in one easy-to-use
integrated system. The system was introduced in ERCA in December1997
and is presently operational both at the head office and branch offices
level.
Cash Register Machine
To safeguard
revenue collected from tax, ERCA has made many entrepreneurs buy
obligatory Cash Register Machine imported by some recognized
suppliers. The machine helps entrepreneurs to record their sales of
goods and services and value added tax on a daily basis. The machine
is connected to the central computer of ERCA and allows it to be more
accurate in its tax estimates and to trace tax evasion.
The machine was introduced in Ethiopia in Feb.2008. Up to the first
week of June 2011, it is revealed that 20,039 businesses in Addis
Ababa are made to own/buy 22,747 cash register machines.
Other modern technologies to be deployed soon
ERCA has also a
plan to set up a call centre with computerized system. A call centre
is an extensive open office for the purpose of giving a response
promptly to various requests from stakeholders. The call centre will
have capable and competent officers with computers, a telephone
set/head set connected to a telecom switch and supervisor station.
The call center officers are expected to have a through knowledge of
tax and customs procedures of ERCA and competent enough to give quick
response to customers who put their question over a telephone. The
call centre is one of the modern approaches to solving the problems
of customers.
Electronic Cargo Tracking system is the other modern system which
ERCA is going to deploy soon. This system is consisted of (1) a road
map which shows the route the cargo truck should take (Geofence), (2)
electronic seal, or a device which is to be mounted on the cargo and
used to provide ERCA information about the cargo, and (3) Global
Positioning System (GPS), a device which is to be mounted on the truck
so that it can provide ERCA information about the status of the truck
and cargo. Through this system, ERCA ensures the security of the
cargo thereby preventing kisheba (cargo theft) and trafficking of
smuggled goods. The cargo tracking device delivers real-time
visibility of all the import-export cargo conveyed by sea and land so
that ERCA can manage to control them with ease and facilitate
legitimate trade.
