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[SYSTEM ANALYSIS
E-GOVERNMENT]
SYSTEM ANALYSIS OF THE ETHIOPIAN E-TAXATION
SYSTEM
 SYSTEM ANALYSIS OF THE ETHIOPIAN E-TAXATION SYSTEM
Introduction

E-Government

Understandings and applications of e-government have different meanings which include internal and
external government communications, modifications to service delivery, changing ideas of democracy
and wider administrative improvement and citizenship. The use of modern technologies for
distributing one-way information is the early understanding of e-government service delivery concept.
To enable two-way government-citizen communication, as recent research places, better emphasis
should be given on the importance of e-government services.

Government has to use e-government services to build better and more efficient administration. The
main idea of e-government is usage of information technology products by all citizens and private
sector to provide services, products and to deliver information and complete financial operation. For
convenient service, electronic services are widely used for interactive information flow in the
transaction process

Using of e-government services in the government organizations provides that the chance to do tasks in
another way but technology might not have the capacity to change wrong way of doing into good ones
but one of the importance of e-government is that it can be used as a tool to improve tax collection.

E-taxation in Ethiopia

E-taxation is one of the most popular e-government services. Most countries are focused on
implementing an e-taxation system. According to the latest Ministry of Finance (MoF)
information, the contribution of Ethiopia’s tax revenue to its GDP was 9.8% in the 2018/2019
fiscal year, which was the lowest, compared to other countries. To increase the country’s tax
revenue, the Ministry has started to implement a digitalised e-tax filing system.

The filing system has reduced the inconvenience of the long queuing and time-consuming
process of filing and paying tax. This has also avoided further penalty and interest payments
resulting from delays in tax filing.
The only remaining issue of the online tax filing system is the collection of the receipt for tax
paid, which requires presence at the tax office. The Ministry of Revenues has clarified that it is
working towards including the receipt collection in the digital system.
In addition, the Ethiopian Customs Authority started providing an online service in September
2020, avoiding the need for customers to physically appear at customs stations. To this end,
the Authority has provided video training to all its employees across the country. Customers
can now upload the necessary documents online and obtain the required documents for
clearing goods, ensuring a considerable saving for both the Authority and the customers in
terms of time, cost and service satisfaction.

The following are digital tools now deployed in Ethiopia:

i. ERCA made a major IT investment in 2004 by developing the Standard integrated Government
Tax Administration System (SIGTAS), an integrated database for managing taxpayers’ records.
 ii. ERCA went further and, in 2008, launched ESRMs. These machines record sales and send the
different business transactions to the tax authority through a general packet radio system
(GPRS) which is a data transfer system through the cellular network.
iii. In 2010, the Ministry of Revenue introduced the first pilot for the tax filing system—named the
e-filing system—that allows the capture of tax declarations online. The objective of the e-filing
system is to allow taxpayers to file taxes online. The tax filing system has been complemented
by the electronic payment system since 2019. The electronic payment system covers taxes
related to private income tax, pension tax and federal taxes such as profit, withholding, cost
sharing, dividend, excise, and VAT.
iv. The e-payment system is still undergoing continuous improvement by ERCA to include internet
banking as a method of payment. The addition of payment methods through financial
institutions will greatly improve service quality for taxpayers and could create a citizen-centric
system, in a country where 59% of the population live more than five kilometers away from the
nearest financial institution.
v. In September 2020, ERCA introduced the electronic single window (ESW) service to eliminate
the need for a taxpayer to be physically present at the customs office to process their
declaration. With the ESW, the taxpayer can upload all required documents electronically and
obtain customs clearance online. The ESW in Ethiopia generated a substantial reduction in
processing time and cost, and boosted customer service satisfaction.
vi. In 2020, the Ethiopian government, through the Ministry of Peace, launched the National Digital
ID Program. Digital ID allows the identification of the taxpayer with ease, and better
communication, enforcement, and monitoring of compliance, in addition to a reduction in
compliance costs. Digital ID systems can bring important savings for “citizens, government, and
businesses” as well as “increase transparency and accountability and drive innovation.”

Objective

This System analysis is intended to answer the following questions

 How does e-tax system work?
 What are the benefits earned in Ethiopia by tax revenue authorities in the adoption of E-taxing
technology?
 What is the barrier for the adoption and growth of E-taxing technology in Ethiopia by tax revenue
authorities?

 What possible involvements will be undertaken by the government to encourage the development of
E-taxing technology?
How it works

Implemented E-government website: https://etax.mor.gov.et

The electronic payment system covers taxes related to private income tax, pension tax and federal taxes
such as profit, withholding, cost sharing, dividend, excise, and VAT. The e-payment system is still
undergoing continuous improvement by ERCA to include internet banking as a method of payment.
When the amount of money to be paid as tax is ascertained, the taxpayer either goes to the designated
revenue authority to pay manually or pays electronically by transferring the amount due from his
account to the designated bank account. Having been notified of the tax payer‘s payment of tax by the
designated collecting bank, the tax authority generates and issues an electronic invoice to the taxpayer,
as evidence of tax payment.

Relevance of E-taxation System in Ethiopia

Ethiopia has historically been part of the experimental deployment of electronic tax systems in Africa to
provide international funders and regional tax cooperation organizations with proof of reduction of tax
evasion and increase in tax payments.
The fact that taxation is essential for sustainable economic development and tax administration is as basic
function of a successful state makes tax authority to improve its tax collection services and make tax
administration more effective. the adoption of E-taxing by tax revenue authorities in Ethiopia regarding the
barriers which can affect the authorities from taking advantage of E-taxing system and anticipated benefits
derived by adopting the system.

The benefits are

o E-taxing to improve customer service and satisfaction-taxing wish to satisfy rapid change of
customer/tax payers need and preference,
o E-taxing to improve the relationship with customer and
o E-taxing to cover wide geographical area for the development of E-taxing technology, increases
productivity of the tax revenue authorities decrease the work load of makers, reduces paper work
and HR requirement
o E-taxing to enhance productivity in the taxing authorities as a driver of adopting and developing E-
taxing system in Ethiopia.

Until recently, Ethiopian digitalization was assessed as deficient. E-filing and e-payment systems were
reported to have a limited number of users and to be always “down” or running very slowly. Few systems at
the Ethiopian tax administration interfaced with other government agencies, making it difficult to obtain tax-
related information from third parties. Taxpayer services were generally poor, with late or insufficient
answers provided by officers to taxpayers. Weak support for taxpayers and poor compliance services
resulted in massive VAT avoidance.

ICT is then an opportunity for Ethiopia to improve tax compliance. There is evidence in 2021 that
technological innovation in Ethiopia has led to a positive response from taxpayers to these changes, with an
increase in revenue of at least 12% for income taxes and 48% for VAT. However, the Ethiopian tax
administration can still be observed as not making use of the available data to its full potential, thereby
opening doors to possible process improvements and further tax revenue benefits as a result of a better
digital strategy.

Major Challenges regarding the implementation of e-taxing

The result of a study indicated that, the major barriers that Ethiopian taxing authorities faces in the
adoption of Electronic taxing are

o Frequent power interruption

o Tax payers low levels of computer literacy
o Lack of sufficient government support affect tax payers willingness lack of uniform platform by
tax authorities for adoption and growth of e-taxing technology in Ethiopia
o lack of skilled manpower exist in tax revenue authorities,
o Limitation in network infrastructure
o Lack of enough coordination, interaction and cooperation between tax revenue authorities and
other decision making/like etc and EELPA /centers in e-taxing context and
o Lack of legal framework for e-taxing for implementation and growth of e-taxing technology in
Ethiopia.

Recommendation
Based on several researches made on the implementation of online tax payment system in Ethiopia, the
following adjustments are recommended.

 In order to adopt and further expand E-taxing technology, all tax revenue authorities have to fully
utilize opportunities, which are available in the country, through incorporating in business plan of the
tax revenue authorities and should develop awareness raising program to its customers (society) on
benefits of E-taxing relating with traditional system,

 All tax revenue authorities should focus on informing customers/tax payers (who are using only
manual system) the benefit of using E-taxing by using medias in order to solve challenges related with
resistance to changes in technology by tax payers.

 The government should support the tax revenue authorities by developing ICT infrastructure to fill
the need of growing customers and establish strong legal framework on use of E-taxing services for
successfully adopt the technology.

 Government should support tax revenue authorities by facilitating development of sufficient ICT
infrastructure for the successful implementation and development of E-taxing services.

 The tax revenue authorities should facilitated proper and continuous training courses for their
employees to have adequate understanding of the E-taxing technology so as to achieve the desired
point.

 In collaboration with tax revenue authorities, Government should make a campaign and inform the
community on the work ability and effectiveness of E-taxing technology.

 The government should make also a campaign at university for students on the benefits of E-taxing
technologies so as to create cashless society in the future.

 The Ethiopian revenue and customs authority (ERCA) should issue desirable legal frameworks and in
force all tax revenue authorities for adoption of the E-taxing technology.

 The Government should set clear direction and focused on technological innovation for the
Globalization of the country

References

Dr. B.C.M. Patnaik, Dr. Ipseeta Satpathy, Mesele Kebede Manaye , (2019), ADOPTION OF ELECTRONIC
TAXING SYSTEM IN ETHIOPIA: REFLECTIONS OF BARRIERS AND DRIVERS, International Journal of Mechanical
Engineering and Technology (IJMET), Volume 10, Issue 03.

Anthony Assassa, Elie Sawaya, (2022), E-Tax Rollout in Ethiopia—A Challenging Road to Renaissance,
https://news.bloombergtax.com/daily-tax-report-international/e-tax-rollout-in-ethiopia-a-challenging-road-
to-renaissance .

Shareef Shareef, Elias Pimenidis, Hamid Jahankhani,(2012), Analysis of the e-Government stage model
evaluation using SWOT-AHP method, Research Gate.
Haymanot Tesfaye. (2020), BENEFIT AND CHALLENGES OF ELECTRONIC TAX FILLING SYSTEM: THE
CASE OF ETHIOPIAN MINISTRY OF REVENUE LARGE TAXPAYERS, Addis Ababa University.