So, three participants were stressed that the current business income tax systems of Oromia Region is unfairness, specially, after the reform of 2017. The researcher was asked the respondents further question to investigate reasons for injustice of the business profits tax systems.As a consequence, the interviewees were disclosed certain areas of unfairness of business income tax systems that include: in appropriate designation of the category of the taxpayers; tax rate, penalties, fail to considered seasonal business of the taxpayers, government’s long-term growth and development plan which requires massive amount of funds and payment of multiples type of tax in the same tax year.
For example, one of the interviewee states the matter as “it is must for a profit taxpayer to disburse three taxes namely, business income taxes, municipal tax and sport’. Specially, the municipal tax and sport influence fairness of the income tax systems while the amount is different from town to town and city to city, albeit they are in similar tax jurisdiction. Additionally, this taxpayer also requested to collected value added tax (VAT) which is very tricky to them to collect from the people where knowledges and benefit of taxations not well know.
Further, participant’s stated that “the current business income tax systems of Oromia practically not fairness due to assigned the taxpayers’ to wrong tax bracket in return force them to pay excessive tax relative to their annual income devoid of detail assessment”. Equally, he argued that the recent income tax reform seriously influence fairness of the business income tax regulation as it was mainly emphasized on taking out the government from financial drought. As a result, they were shocked while their income bracket was rose from 500,000 EBR to 1000,000 EBR; 100,000 EBR to above 500,000 EBR but less than 1000, 0000 EBR and from less than 100,000 to less than 500,000 for Category “A, B and C” while their annual actual income on the ground was less than that. Furthermore, he stated that this in appropriate tax bracket causes inequitable tax rate. Hence, peoples expressed the problems saying “Gibiraa fi Gidiraa” meaning that “Tax and Pain”. Thus, it affected general fairness.
The forth participants testified that “penalties and sanctions” that imposed on the taxpayers were sometime excessive relative the problems due to scams and frauds associated to tax administration. Subsequently, he pointed out that, oftentimes the tax procedures and policies used for the purpose of assessed and determined taxable income was different among taxpayers. Therefore, this problem distress retributive fairness.
Moreover, this person also expressed that, “it create difference among whose paid withholding tax at federal and business income tax at regional and only paid business income tax at region. For example, for those whose withhold certain amount of their business profit at federal equal amount is deducted for them at local revenue offices while their counterpart have such advantage.
For instance, Mr. Bobas and Mr. Bon are under category “A” business income taxpayers and their annual revenues is 2,000,000 EBR. However, Mr. Bobas trades coffee, whereas, Mr. Bon provides hotel services at Dambi Dollo. Thus, Mr. Bobas withholds and paid 2% of his income (2,000,000 EBR) at the federal department and reports the amount back to Dambi Dollo office allege for deduction. So, the local tax office required to deduct equal amount for him. In contrast, Mr. Bon taxed at local department on his total 2,000,000 EBR. Let see the impacts of taxed taxpayers within identical tax bracket, taxable income at multiple tax jurisdictions on the concept of tax equity.
To Gimbi tax authority:
Mr. Bon 2,000,000 x 0.35 = 700,000 EBR = Schedule “C”
Amount to be paid at Federal government in the form of withholding By Mr. Bobas =
2000,000 x.02 =40,000 EBR = Schedule “D”
After Withholding of 2% (40,000) at the Federal department the taxable income that Mr. Bobas expected report to the Regional Tax Office will be 1,960,000 EBR. i.e
1,960,000 x 0.35= 686,000 EBR
So, Mr. Bobas paid 40,000 as withholding tax (Schedule D) and 686,000 as business income tax subject to Schedule” C”. The total tax expense of Mr. Bobas is 726,000. Afterwards, Mr. Bobas incurred 726,000 birr additional expenses due to withhold part of his income at other tax jurisdiction. Beside, these officers explained that oftentimes the amount of tax the taxpayers withhold at federal level tax was more than what he/she asked to disburse at regional revenue offices. If this is happen, the local revenues bureau requested to refunds the taxpayers notwithstanding the taxpayers at federal office. Agitatedly, he was argued the issues as” nuti qarmii funaannaa galiin keenya harki caalu federaalatti kaffalama”. Arbitrary it mean that, “We are collecting the remnants while, most of the taxes subject to regional state are paid at federal revenue department”. Thus, this issue alone impaired horizontal, administrative, exchange and personal fairness.
The fifth participants said that the current income tax system is fair enough. The perceptions of this partaker narrated as follows:
“I believe the business income tax systems logically fair to the Ethiopian, mainly, Oromian, due to 2017 income taxes reforms. Likewise, I as per my knowledge and experiences an individual did not excessively taxed. So, the recent business income tax systems of the Oromia Region, is realistic and okay, equal, in return, maintain fairness principles among the individuals”. As a result, “I believed that the income tax systems particularly, profit tax is absolutely correct, certain, equal, I consider it is a fair tax laws.”
Notwithstanding, sixth persons said that “except some injustice related to penalty, sanctions and tax administrations, I observed that the present business income tax rules and regulations are normally fair”. Hence, their perceptions explained that the new income tax systems of Oromia region missing retributive and insufficient procedural fairness’s.
The seventh person perceived that” the existing business income tax systems is fair but most of the funds were not used efficiently and effectively. In addition, he expressed that, “each year the revenue bureau of our town collected huge sum of money in the form of business income tax but we don’t see where all this money is going. With large amount the government curb, the community in the region, mainly, town getting little services that ever before, hitherto, business profit taxes and number of taxes are enormously elevated each year”. Hence, his perception pointed out that the income tax law despair exchange fairness.
Eighth interviewee “I think that the fairness of business income tax systems expressed in terms of how to impose, how to collect, when to collect and how to use the taxes are matter fairness and perception of the taxpayers”. Furthermore, “I think income tax systems are normally fair, however, the only problem I do have is that ineffective and inefficient spending of the government”. Particularly, what were happened in the last three fiscal years at our city and Oromia were shocking because majority of budget of the government was used by the security forces due to political instability. Thus, his opinion was the indictor for the inappropriate utilization of the public fund obtained in the form taxes. This type of issues affected the exchange equality.