ETHIOPIAN POLICE UNIVERSITY

Department of Crime investigation and Forensic science College

5th Round Advance Degree Crime investigation

Individual Assangemente one

Money Laundering (ML)

Nane :-Aklilu Ayza Ashango

ID.NO 004/2014 E.C

Summited to:-Tensae G.Krstos

April 28, 2023

Sendafa, Ethiopia

i
Table of Contentes

Conteats page

I. Cabre page:-------------------------------------------------------------------------------------------------------i
II. Table of Contentes:- ------------------------------------------------------------------------------------------ii
1. 1.NTRODUCTION :-
2. 1.1. The definition:-
3. 1.2. Tax evasion :-
4. 2 The nature of the crime of tax evasion:-
5. 3. Common and Modes oprendm Tax Evasion Methods:-
6. 3.1. Filing of a false return and a false amended return:-
7. 4. Value Added Tax Law :-
8. 4.1.Value added tax law and tax evasion:-
9. 4.2. What is VAT evasion? :-
10. 4.3.. Actions that may constitute VAT evasion:-
11. 4.4 .Tax evasion by understating the merchant's sale:-
12. 4.5 .Tax evasion by reducing the amount of sales :-
13. 4.6.Tax evasion by improperly changing different rates of value added tax:-
14. 4.7 .Failure to pay the collected tax (VAT) to the government:-
15. 4.8. Avoidance of value added tax that should be collected by importing goods illegally:-
16. 4.9 .Claiming a false tax return:-
17. 4.10. Bogus Traders :-
18. 4.11. Failure to collect value added tax on supplies that the merchant provides to himself:-
19. 5.Conclusions :-
20. 6.Recomandation:-
21. 7.References :-

ii
 1. NTRODUCTION

Taxation is as old as history of early state formation. As tax remains essential source of public finance,
states used to collect taxes for public funding. Apart from its extant condemnation by modern
governments, one can strongly argue that tax evasion remains persistent challenge from the very
inception of state. Nowadays, following the advancement of public finance the concept of tax evasion
get emphasis by tax scholars. It is now condemned and categorized as anti-social behaviors as well as
criminal act.

The tax system is closely related to the government system and the government has to levy and collect
taxes to continue as a government and spend the collected taxes for social services of the citizens. The
power to levy and collect taxes is an exercise that must have a legal basis, and in a democratic society,
the source of this power is the consent of citizens to the government based on the social contract.

The government can only collect the taxes needed to meet the infrastructure and other services needed
by the people it governs when a fair tax system is established in the country and tax compliance is
ensured at the required level.

Tax compliance can expose the tax system to many challenges without establishing it at the desired level
among the citizens, and the tax system is said to be one of the most dangerous problems for the tax
authority.

1.1. The definition

What is tax evasion ?

Tax Evasion is intentional deceitful act/omission to reduce tax payable under the law and conspiracy to
the effect. Likewise, the definition comprise essentials of tax evasion such as existence of affirmative
act/omission that ends in Tax deficiency or under reporting of the tax less than the tax payable under
the tax law.

1.2. Tax evasion

In this article, I will try to explore the nature of tax evasion, the actions that constitute tax evasion under
different types of taxes, the possible causes of tax evasion and the ways to prevent it. The starting point
for me to write this article are the findings of the tax audits that the Ethiopian Revenue and Customs
Hawassa Branch was presenting to explain the criminal charges of tax evasion when I was working at
the Customs and Tax Criminal Court. The evidence that was presented to the defendants who were
accused of committing various tax evasion crimes, the written evidence detailing the findings of the tax
audit conducted by the tax auditors and the professional testimony of the experts who conducted the
same tax audit are mainly mentioned. Tax evasion Some of the tax audits conducted by the Ethiopian
Revenue and Customs authorities provide accurate evidence of tax evasion,. Since tax evasion is an
illegal act against development that has a negative impact on the country's economy, it is an act that
both the government and the entire
Society should prevent. But it does not mean that everyone who has not paid taxes has evaded taxes.
Because the reason for not paying taxes may not be only tax evasion.

On the other hand, the unpaid tax may be due to the inability of the person to pay or the unpaid
amount of tax due to a genuine error. Tax evasion refers to an illegal approach that hides the amount of
tax that should be paid by knowingly and knowingly doing various deceitful, fraudulent and misleading
things for a known tax obligation that is not paid due to a mistake or inability to pay.

I think it is difficult to say that it is in line with the law when looking at the practice of criminal and civil
liability for non-payment of taxes in our country. Because, firstly, non-payment of tax is not seen to be
dealt with separately in criminal and civil cases as well as civil cases only. Thus, when a taxpayer who
commits tax evasion should be prosecuted criminally and civilly, if the judicial responsibility is
discharged, there are improper procedures in which criminal charges are not filed due to the lack of
awareness of the tax collector's office.

2 The nature of the crime of tax evasion

Tax evasion is clearly defined as a criminal act in Article 125 of the Tax Administration Decree 983/2008,
and the act of concealing income with the intention of evading tax, the act of evading property in order
to avoid paying tax, and the person who is obliged by law to reduce tax and avoid it, must deduct the tax
from the payer's account to the revenue collection authority. He saw the activities of not transferring
the house clearly as a crime of tax evasion.

The most common type of tax evasion in our country is tax evasion, which is done by hiding income.
Since the definition of tax evasion is determined based on the tax law of the countries where it is
governed, it is difficult to give a uniform definition to the word, but it is appropriate to see the meaning
given to tax evasion in countries with developed tax legislation to understand the general nature of tax
evasion.

3. COMMON AND MODESOPRDEM TAX EVASION METHODS

Tax evasion methods are affirmative acts which tax payers use to evade taxes. Different tax payers use
different methods of evasion. Amongst the well-known affirmative acts of evasion includes-

3.1. Filing of a false return and a false amended return.

Failure to file return coupled with an affirmative act of evasion is commonly referred to as a "Spies
evasion." Passive failure to file tax returns is not tax evasion. If the taxpayer failed to file a return, an
evasion case can be maintained only if the taxpayer engaged in an affirmative act to conceal or mislead.

Keeping a double set of books Making false or altered entries .Making false invoices. Destruction of
records. Concealing sources of income. Handling transactions to avoid usual records. Any other
conduct likely to conceal or mislead. Filing false and fraudulent Forms W-4 claiming to be exempt from
federal taxation in combination with failure to file tax returns for each year can constitute an affirmative
act of evasion. Beside the above methods, tax can be evaded by:- Making false statements to tax
authority officer which relates to fraud. Corporate officer's diversion of corporate funds to pay
personal expenses. Sluicing (washing) off corporate income to principal shareholders in the guise of
commissions or salaries out of proportion to the value of service rendered to the corporate
taxpayer .Consistent pattern of overstating deductions. Concealment of bank accounts. Representing
political gratuities as gifts. Doing business in diverse names and keeping large sums of cash in safe-
deposit boxes in numerous banks. Failure to file declaration of estimated tax, concealing or attempting
to conceal true income, failure to pay income tax due, and filing frivolous returns. Structuring cash
transactions etc

4 . Value Added Tax Law

Accordingly, in the first part, I will analyze (explain) these concepts from the point of view of
the Value Added Tax Law.

4.1.Value added tax law and tax evasion

Value added tax is a basic tax that is classified as an indirect tax and is collected from consumers based
on the selling price of the goods or services when a person who is registered as a value added tax
collector performs the work of providing goods or services that are subject to value added tax.

4.2. What is VAT evasion?

Regarding VAT evasion, is not a matter that has been given a clear meaning in our country's Value
Added Tax Law Proclamation No. 285/94. However, by properly interpreting the actions listed in Article
49 of the Act as constituting the crime, it is possible to arrive at a better understanding. When we look at
the Amharic definition of the same article, the title of the article is about non-payment of tax in violation
of the law, and the details are: "Any person who does not declare the tax collected in violation of the
law, or who does not pay the required tax, or who claims an undeserved tax refund with the intention of
defrauding the government, is considered to have committed a crime." Therefore, in addition to the fine
imposed under Section 11 of this Proclamation, he shall be punished with imprisonment of not less than
five years upon conviction in court; He says. The English definition of the title of the article is "Tax
evasion" and the details are "A person who evades the declaration or payment of tax or a person who,
with the intention to defraud the government, applies for a refund he is not entitled to, commits an
offense and in addition to any penalties under section 11, may be prosecuted and, on conviction, be
subject to a term of imprisonment not less than five years." It has detailed content. In the Amharic
definition of the provision, the title of the provision, which is about non-payment of tax in violation of
the law, and the wording of the law in violation of the law, which declares the tax collected in violation
of the law or does not pay the required tax, are ambiguous, so that the purpose of the law to ensure the
goal of the law is to be interpreted without departing from the spirit of the law. We are allowed.
According to this, it is necessary to find the appropriate meaning of the unclear part of the provision
using the methods of interpretation of criminal law. It is not easy to distinguish whether the phrase "in
violation of the law" is intended to describe the criminality of the act or whether it is meant to be
applied only to the offender who knowingly commits a crime. The expression in this provision that a
person who claims undeserved tax with the intention of defrauding the government is considered to
have committed a crime does not create any problem in terms of interpretation. Because the expression
"with intent to defraud the government" shows that tax evasion is classified as a crime. Because it is a
fraud. Therefore, when interpreting the law, it is a well-known principle of interpretation in criminal law
that the expressions in one article must be interpreted in a manner that is consistent and can give a
uniform meaning (Harmonized construction). Therefore, when you look at the expressions in Article 49
of Proclamation No. 285/94, the expression that he claims an undeserved refund with the intention of
defrauding the government is an act of tax evasion. Interpreting a tax evasion offender to be criminally
responsible is an interpretation that gives positive results so that all the expressions in the article are
applied in a consistent manner. From the point of view of the law-making system, it is not considered
that the legislator will put together conflicting ideas under one provision, so it will be plausible to
interpret the law in a way that gives a uniform meaning. On the other hand, when looking at the English
definition of the provision, it clearly shows that tax evasion is an act of tax evasion that is committed as a
crime. Therefore, if the Amharic expression is not clear, the use of the English expression for translation
is the practice allowed by the law.

4.3.. Actions that may constitute VAT evasion

While it is not possible to list all the activities in which VAT can be evaded or evaded, the following
can be mentioned as examples.

4.4 .Tax evasion by understating the merchant's sale

A trader who is registered as a value added tax collector may understate the amount of sales he made in
order to avoid paying the full value added tax to the tax collector's office while collecting value added
tax (VAT) in this transaction by providing goods or services. In order to do this, he may conduct
transactions without receipts, organize false accounts, or not record the sales he has made in order to
hide his sales in some way. If the sales amount is lowered (concealed) and the value added tax collected
on the undeclared sales is avoided, it commits tax evasion. Since this is an illegal act that is having a
negative impact on tax collection in our country and other countries, both the government and citizens
should recognize the seriousness of the problem and prevent it together. People who participate in this
type of action should know that the action is illegal and punishable by crime, and they should avoid this
illegal action and save themselves from liability.

4.5 .Tax evasion by reducing the amount of sales

The action described in turn number one refers to the situation in which people who are registered for
value added tax do not fully or partially disclose the amount of their sales and keep the value added tax
collected on the hidden / undisclosed / sales to themselves, but in this action, the purchase amount is
reduced from the actual purchase amount in order to reduce the amount of sales. It is a practice to
claim tax refunds by understating the amount of value added tax that should be collected. In this way,
some merchants under invoicing the goods they bought, and the input tax they paid on the goods is
more than the output tax they collect when selling the goods, and they always claim tax refund. For
example, traders who import a commercial item from abroad, when they sell the commercial item
imported from abroad in the local market, when they do the price construction of the item, the price of
the item is calculated according to the customs law, the duty and tax paid for the item, the amount of
the item from the customs border of Ethiopia to the warehouse of the taxpayer. Any costs and other
expenses incurred until the item is ready to sell must be built into the selling price of the item. The price
structure of goods that is not in accordance with the customs and tax laws, but by reducing the purchase
price, the input tax paid on the goods is less than the output tax collected at the time of sale, thus giving
you the opportunity to always bet on tax refund. The effect is the same if there is an act of
undervaluation of purchases made in the domestic market.

4.6. Tax evasion by improperly changing different rates of value added tax

If the goods or services provided by a trader registered as a VAT collector have different VAT rates
(paid), the trader can exchange the tax collected on the supply of goods or services with a higher value
added tax for smaller supplies and avoid the difference in tax for himself. Violation may be prosecuted.

4.7. Failure to pay the collected tax (VAT) to the government

This can be done through the actions described above, and there is a situation where traders who
collect VAT from their transactions in a pre-calculated manner will not be paid the pre-collected VAT by
issuing a bankruptcy decision as if their company has not faced bankruptcy. On the other hand, there is
a type of tax evasion that is widely seen in our country as well as in other countries. In view of the
serious damage of this act, if the government office that administers the value added tax fails to do a
strict monitoring and control work on the traders who are registered as value added tax collectors, the
impact on the tax system may be severe.

4.8. Avoidance of value added tax that should be collected by importing goods illegally

Since our country's value added tax law follows the destination principle, according to article 3 of the
decree, any person who imports these goods into Ethiopia must pay value added tax, and the amount of
the charge, including the duty and tax paid on the goods, is determined according to the customs law of
Ethiopia. Article 14 of the decree stipulates that 15 percent value added tax will be paid on the price.
However, if the goods are imported illegally, the duties that could have been paid on these goods,
including VAT and other taxes payable on imported goods, remain unpaid. Illegally imported goods are
not only imported without paying the appropriate duties and taxes, but are sold in the domestic market
at lower prices than other competing goods, thus adversely affecting trade competition. It can be said
that the impact of tax evasion is multi-faceted, as most of the time they are sold without receipts in the
local market and the tax that should be collected is not collected.

4.9 . Claiming a false tax return

Four methods are currently known in the world regarding the method used to calculate the amount of
value added tax that people who collect value added tax must pay. These are credit invoice VAT, credit
subtraction VAT that does not rely on VAT invoices, sales subtraction VAT and addition method. VAT). Of
these, most of the world's countries, including our country, use it and it is the first method that is widely
used. In countries that follow a VAT refund system, traders who collect VAT pay VAT when they first
purchase a VAT-capable good or service.. If they have a receipt, they will be given the opportunity to
force the government to charge the input tax stated on the receipt. Although the VAT receipt is a great
contribution to tax refunds, on the other hand, by preparing a fake invoice or using a legally printed
invoice to make a purchase that has not been made, or by making an inflated purchase, it creates a
situation where many tax refunds are taken illegally. Since the effect of this action on the tax system is
serious, in order to prevent the illegal action, the tax collector's office should properly verify the legality
of the receipts submitted to claim tax refunds, and conduct strict investigation and monitoring as much
as possible to ensure that the transactions that are said to have taken place with legitimate receipts
have been carried out properly. Another issue that should not be overlooked is that countries with VAT
laws such as our country have the following principle of VAT destination, which is mainly known to align
with the principles of the international trade organization: Exports are included under zero VAT rate.

4.10. Bogus Traders

Some companies may only be set up to generate invoices to claim tax refunds. In this way, the
companies, by issuing a business license and registering as value added tax collectors, engage in selling
and cutting VAT invoices without conducting transactions, and commit illegal acts that hide taxes from
the government treasury under the tax return system. It is known that organized value added tax
evasion crimes in the same way are being seen widely in our country and proper control should be done
quickly.. The work of educating and warning anyone to avoid engaging in this kind of behavior should
also be done properly.

4.11. Failure to collect value added tax on supplies that the merchant provides to himself

While some traders are subject to VAT on the supply of goods or services they supply to themselves,
their families or employees, they do not collect VAT. This approach is a wrong approach from the point
of view of the Value Added Tax Act. Because according to Article 4(2) and (3) of Value Added Tax Law
Decree No. 285/1994 and Article 3(2) of Value Added Tax Regulation No. 79/1995 and other articles,
these supplies should be considered to be used to carry out taxable business activities and appropriate
They stipulate that VAT must be collected. Therefore, it should be noted that non-collection of VAT on
these supplies is a legal requirement.

Finally, it is known that VAT can be hidden through the above-mentioned and other similar actions, and
the government and citizens should do their part to prevent the crime. The value added tax audits
conducted by the Ethiopian Revenue and Customs Authority should be carried out by experts who know
the law and should be transparent and accountable. I advise those who knowingly or unknowingly
participate in this illegal act to avoid liability in this assingmente
5. Conclusions

Tax evasion Some of the tax audits conducted by the Ethiopian Revenue and Customs authorities
provide accurate evidence of tax evasion, while others are highly exaggerated, prone to unprofessional
speculation, and do not create reasonable certainty of criminal prosecution. Since tax evasion is an
illegal act against development that has a negative impact on the country's economy, it is an act that
both the government and the entire society should prevent. But it does not mean that everyone who
has not paid taxes has evaded taxes. Because the reason for not paying taxes may not be only tax
evasion.

Tax laws basically emanate from three sources; legislative, administrative and judicial sources. The
major sources of Ethiopian tax laws are legislative sources. There are a number of laws that have been
adopted by the legislature of the country to deal with the different types of taxes in the country and
their administration

“he commission or omission of an act knowingly with intent to deceive so that the tax reported the tax
payer is less than the tax payable under the law or a omission of revenue, fraudulent claiming of
expenses or allowances and the deliberate misrepresentation, concealment or with holding of material
facts “

Finally, it is known that VAT can be hidden through the above-mentioned and other similar actions, and
the government and citizens should do their part to prevent the crime. The value added tax audits
conducted by the Ethiopian Revenue and Customs Authority should be carried out by experts who know
the law and should be transparent and accountable. I advise those who knowingly or unknowingly
participate in this illegal act to avoid liability in this assingmente
6.Recomandation

 tax administration at all levels of government should be promptly computerized, it is better for
the taxing
 authority to fulfill the required number of experienced personnel with the required
qualifications and there should be continuous training for tax officers on how to provide rapid
and courteous service, continuous
 education for citizenry has to be embarked upon and step has to be taken to convince the tax
payers that the ,money collected in form of taxes are judiciously spent and the tax department
should adopt scientific procedures
 in collecting data and selecting taxpayers for further audit and perform risk based tax audit
 Taxes are important sources of public revenue. Tax avoidance and tax evasion are widely
believed to be significant factors limiting revenue mobilization. In Ethiopia, tax evasions and
avoidances are pervasive features in tax collection process.
 Based on the conclusions of this paper, the Researchers recommend the following points:
 Data base for tax administration at all levels of government should be promptly computerized to
ensure
 that the system of information storage processing and retrieval is efficient.
 It is better for the taxing authority to fulfill the work position with competent and experienced
personnel
 so as to audit and inspect the accounts of tax payers there by protecting income tax evasions.
And there
 should be continuous training for tax officers on how to provide rapid and courteous service.
 .The government should create tax compliance culture through education by creating for
example, pamphlets, newspapers, television
 advertisements, and public meetings with taxpayers and continuous education for citizenry has
to be embarked upon and step has to be taken to convince the tax payers that the money
collected in form of taxes are judiciously spent.
 The tax department should adopt scientific procedures in collecting data and selecting
taxpayers for further audit and perform risk based tax audit. For example, tax assessors should
audit prominent high-profile taxpayers than relatively small taxpayers who are not providing
much revenue.
 The level of punishment should be stricter and the legal provisions for doing this should be
clearly Led, typically, by the hedonistic interest with reference to monetary interest, natural or
legal persons engage an active and often ingenious behavior in order to avoid the payment of
taxes imposed by the state.
 Tax evasion takes place today at the line between licit and illicit activities. Payment of taxes is
the effect of citizens fearing the potential sanctions they would suffer if they adopted an
indifferent attitude towards the payment of taxes. Naturally, the first step against tax evasion
 having long-term negative effects. And The increase of penalties must be sufficient enough to
eliminate crimin

7.References

 Sources of D/t Ethiopian Tax Laws and proclamation

 Prevention and suppression of money and financing of terrorism proclamation NO 780/2005 in
Ethiopian colander or No 780 2013 PEDERAL NEGARTE GAZETTA
 EPUC;- Ethiopia police university 2015 E.C Money launderer teaching material power Ponte
 Tax laws basically emanate from three sources; legislative, administrative and judicial sources.
The major sources of Ethiopian tax laws are legislative sources. There are a number of laws that
have been adopted by the legislature of the country to deal with the different types of taxes in
the country and their administration.
 The first law that can be taken as a source is the FDRE Constitution which has numerous
provisions dealing with the administration of taxes. Then after, there are a number of
proclamations and regulations dealing with taxes in the country, the most prominent of which
include Income Tax Proclamation No. 286/2002 (amended by (Pro. No. 608/2008) and (Pro. No.
693/2010)); Council of Ministers Income Tax Regulation No. 78/2002 (amended by (Reg. No.
164/2008)); Value Added Tax Proclamation No. 285/2002 (amended by (Pro. No. 609/2008));
Council of Ministers Value Added Tax Regulation No. 79/2002; Turnover Tax Proclamation No.
308/2002 (amended by (Pro. No. 611/2008)); and Excise Tax Proclamation No. 307/2002
(amended by (Pro. No. 570/2008) and (Pro .No. 61 Acronyms:
 Value Added Tax (VAT) is a type of tax used by more than 150 countries in the world, and our
country has approved the law by Proclamation No. 285/94 and put it into effect on December
23, 1995. Value Added Tax has been around since 1954 in France, but it is surprisingly the most
widely used form of tax in the world. Differently from other tax laws and in a short period of
time, many countries have used them, and the following reasons are mainly mentioned.
 Examining the Tax Administration Law of Ethiopia in Light of the Tax Compliance Theories
 A Study on Tax Evasion and Avoidance in Ethiopia: and Tensae G.Krstos lecture law and other
 The Case of Ethiopian Revenue and Custom Authority Bahir Dar Branch Abate Gashaw Ayele
Lecturer, College of Business and Economics, Debre Markos University
 May knawullages and computer ,internet