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Ethiopian Revenues and Customs Authority

1. Introduction

It is commonly understood that every government seeks to raise revenue, mainly through taxation, in order to pay its expenditure on infrastructure development. In Ethiopia, the responsibility to collect revenue for the federal government rests with the Ethiopian Revenue and Customs Authority (Hereafter cited as the Authority). In addition to raising revenue, the Authority is responsible to facilitate the legitimate movement of people and goods across the border. Simultaneously, the Authority focuses on those people and vehicles that may involve in the act of smuggling i.e. the act of bringing into or taking out or the country goods on which customs duty and taxes are not paid and goods the importation or exportation of which are prohibited by law. The Authority conducts investigation, audit and prosecutes offenders. In the attempt to discharge its responsibility, the Authority closely works with the Federal Police, Standardization Authority, Ministry of Health and Immigration Service and with other stakeholders.
Having underlined the most important roles of the Authority, it would be necessary and proper to stress on its background, objectives, organizational structure, etc.

2. Background Information

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. Some of those reasons include:

1.      To provide the basis for modern tax and customs administrations,

2.      To cut through the red tape or avoid unnecessary and redundant procedures that results delay and are considered cost-inefficient etc.

3.      To be much more effective and efficient in keeping and utilizing information, promoting law and order, resource utilization and service delivery,

4.      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.

3. Objective of the Authority

1.      The Authority has the following Objectives:
1. To establish modern revenue assessment and collection system; and provide customers with equitable, efficient and quality service,
2. To cause taxpayers voluntarily discharge their tax obligations,

2.      To enforce tax and customs laws by preventing and controlling contraband as well as tax fraud and evasion,

3.      To collect timely and effectively tax revenues generated by the economy;

4.      To provide the necessary support to regions with a view to harmonizing federal and regional tax administration systems.

4. Vision and Mission Statements, Values and Principles

4.1 Vision:

The Authority's vision is to see “fair and modern taxes and customs administration system that enhances the proper and effective revenue collection”.

4.2 Mission

The ERCA shall promote the voluntary compliance of taxpayers, ensure integrity and develop the skill of the employees, support the modernization and harmonization of the taxes and customs administration system, contribute to economic development and social welfare through effective revenue collection.

4.3. Values

o Customer focused service delivery (trust, respect, protect, support)
o Protect the well-being of the society
o Integrity and transparency
o Professionalism
o Collaborative working

4.4. Business drivers

The key business drivers have been identified as follows:
. Revenue collection
.Trade facilitation
. Enforcement and security
. Reliable data and statistics
.Process oriented management
.Good governance

  5, Powers and Duties of the Authority

Information regarding powers and duties of the Authority is spelt out in the proclamation No. 587/2008.

6, Organization of the Authority

The Authority has its headquarters in Addis Ababa. The Authority is led by a Director General who reports to the Prime Minister and is assisted by four Deputy Director Generals, namely Deputy Director General for Corporate functions sector, Operations sector, Change management and Support sector, and Enforcement sector.
Both the Director General and the Deputies are appointed by the Prime Minister. The Authority, at the headquarters level, has 19 business processes and 2 directorates namely Women's Affairs Directorate and Ethics Directorate. According to the Council of Ministers Regulation No. 155/2008, the technical term “business processes” is defined as a class or some class of work flow in which a serious and succeeding group of activities are performed step by step by a case worker or a case team in a single cycle of performance to bring about a result from the external or internal inputs and information utilized in the general course of performance of the Authority. Each business process and directorate is led by a Director. The two directorates, Audit and Inspection Business Process and Public Relations and Image Building Business Process are directly accountable to the Director General while the remaining are accountable to the four Deputy Director Generals. Please have a look at the attached organizational structure to see the chain of command.

Apart from the 19 business processes and the 2 directorates at the headquarters level, the Authority has 17 field offices which can be divided as follows: 15 branch offices located in a regional state or city administrations and 2 coordination offices located outside of Ethiopia at the port of Djibouti and at the port of Burbera, Somalia. Each field office is directed by a manager who is accountable to the Director General of the Authority. Following are 4 tables that depict the list of sectors, business processes and directorates, branch offices, and coordination offices respectively.

Table A

 Table C

Organizational structure

Table D

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 not presently functional.

Various Tax Centers and Customs Control Stations are also placed under the administration of the branch offices. Tax Centers are a tax collection stations, located in the vicinity of tax payers while Customs Control Stations are stations where customs formalities are complied with and collection of taxes and duties take place on imported and exported goods. Customs Control Stations are located at the frontiers or in between the borders of Ethiopia and its neighboring counties.
The Authority oversees and supervises the activities of the National Lottery Administration.

7,  The Authority's Employee

The Authority presently has 2446 employees arranged to carry out various tasks based on internal rules and procedures. However, the overall staff of the Authority is expected to grow rapidly reaching a figure of 4500 or thereabouts as the Authority is presently recruiting new employee to fill up the vacancies created by the reengineering. The Authority's employee consists of computer specialists, Auditors, investigators, communication specialists and many other types of workers. The Authority has also small group of prosecutors appointed by the director General of the Authority. The Working hour of the employee is determined to be 8 hours per day and 43 hours per week. In Selected areas where customs operation takes place, employees are made to work in a shift to make the 24 hours service delivery possible.

The Authority's employee is governed by the law spelt out in the regulation No-155/2008.

 8, The Authority’s Advisory Board

The other important sector of the Authority is the advisory board. This board holds quarterly meeting at the head office of the Authority. It consults with and makes recommendation to the Director General of the Authority on matters of policy and strategy as spelt out in the proclamation No.587/2008. The Director General of the Authority is the chairperson of the board and designates the board members based on their competence and efficiency.

9, Transfer of Responsibility to Federal Police

 Since July 7/2000 the responsibility of preventing contraband is transferred to the Federal Police.

Previously this responsibility was carried out by the Ethiopian Customs Authority. Accordingly, The Federal Police is responsible to organize and deploy police force to prevent criminal offences committed in violation of customs and tax laws. The police force assigned by Federal Police is responsible to accomplish the activities: spelt out in the proclamation No 587/2008

Besides the Federal Police, the Authority also plays a significant role in preventing contraband. Using various intelligence agencies, the authority gathers, analyzes and organizes the information about smuggling and provides it to the police force.

The Authority, with Federal police, combats smuggling to prevent the adverse effect on the socioeconomic development of the country. For instance habit-forming smuggled drags defile the minds of the youth. Smuggled-in explosive material would be used to intensify crime and antisocial behaviors if it falls in the wrong hands.

Please see the detailed information about the adverse effects of smuggling on our website www.erca.gov.et under the title "The Need to prevent contraband".