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, it is responsible to protect the society from adverse effects of smuggling and contraband. It seizes and takes legal action on the people and vehicles involved in the act of smuggling, any tax evasion and avoidance while it facilitates the legitimate movement of goods and people across the border.
Establishment of ERCA
The Ethiopian Revenues and Customs Authority (ERCA) was established by the proclamation No .587/2008 on 14 July 2008, by the merger of the Ministry of Revenue, Ethiopian Customs Authority and the Federal Inland Revenue Authority for the purpose of enhancing the mobilization of government revenues, while providing effective tax and Customs administration and sustainability in revenue collection. The main objective of the establishment of ERCA was to streamline the public revenue generation function by bringing the relevant agencies under the umbrella of the central revenue collector body.
This structuring aimed at improving service delivering, facilitating trade, enforcing the tax and customs laws and thereby enhancing mobilization of Government revenue in sustainable manner.
A study called "Business Process Re-engineering" had taken place before 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.
Documents for the import and export goods were 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 looks as an impediment for international trade. The former tax and customs administration also has long been criticized for lack of efficient and effective 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 and illegal practices. In its proposal, the team has suggested merger of the foregoing three administrations. The study team believed that it would be better if the three administrations merged, forming a single powerful organization to increase modern and equitable tax and customs administration system, effective resource utilization and quick service delivery. Presently, the Authority is exercising the powers and duties that were granted to the Ministry of Revenue, the Federal Inland Revenue Authority and the Customs Authority by existing laws.
The Addis Ababa City Tax Administration and ERCA have signed a memorandum of understanding in January 2011 to gain support from ERCA. The main objective of the agreement is to enhance the capacity of tax administration of the city to collect its revenue effectively and efficiently. Based on the agreement, the administration part of the city tax administration is temporarily merged to ERCA; the revenue collected is to the Addis Ababa city government administration.
ERCA’s vision is being a leading, fair and modern Tax and Customs Administration in Africa by 2025 that will finance Government expenditure through domestic tax revenue collection.
ERCA’s mission is to 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.
ERCA understands its customers and their needs, treat them with trust and respect and help them meet their obligations. It acts with integrity, transparency, accountability and professionalism to enforce customs and tax related laws. It works closely with stake holders and ensures the participation of women.
The key business drivers have been identified as follows:
Reliable data and statistics
Enforcement and security
ERCA is organized as an authority led by a Director General (with the rank of minister) with direct accountability to the Prime Minister. The Director General assisted by five Deputy Director Generals, both the director general and deputies are assigned by the prime minister. There is an advisory board to the Director General for advice on policy issues. In order to achieve its goals, it has organized itself into divisions, directorates and work units at head office level based on business process. While, the office of the Director General serves as a secretariat for the authority and is managed by a Director, a management team/council comprising of professionals is also organized within the secretariat to provide the necessary advice to the Director General. Furthermore, five of the directorates at the head quarter also directly report to the office of the Director General.
There are five divisions directly reporting to the Director General each headed by Deputy Director General. The divisions are: 1) Domestic Tax Development and Support Division 2) Customs Programs Development and Support Division 3) Tax Law Enforcement Division 4) Modernization and Corporate Division, and 5) Addis Ababa City Tax Program Development and Support Division. The five divisions are further organized into 30 directorates (six under Domestic Tax Development and Support Division, four under Customs Programs Development and Support Division, ten under Tax Law Enforcement Division, eight under Modernization and Corporate Support Division, and three under Addis Ababa City Tax Program Development and Support Division)
ERCA is also further organized into branch offices to administer domestic and customs duties. Accordingly, ERCA administers domestic taxes and customs duties in its 34 branch offices throughout the country.
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) .
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.
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.
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.
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.
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.
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.