VAT in Ethiopia

Paper Summary:

This paper provides an assessment of the economic impact found when replacing Ethiopia's sales tax with a value-added tax (VAT). The paper assesses the effectiveness of VAT's in terms of its ability to achieve several objectives. These objectives include: Generation of more government revenue and encouragement of investment and trade by modernizing the tax administration. Moreover, the study identifies the problems encountered during the implementation of VAT and recommends possible solutions.

Table of Contents
Introduction
Background
Attitude
Objective of Study
Overview
Brief History
Definitions
Value Added Tax
Direct and Indirect Taxes
Tax Base and Tax Rate
Comparison between Sales Tax and Vat
Similarities
Differences
VAT Implementation Process in Ethiopia
Tax Reform
Vat Introduction
Need for VAT
Registration Process
Vat Threshold
VAT Rate
Implementation Problems
VAT Registrant
Non-Issuance
The Use of False Invoices
Consumers not Willing
Benefits of VAT
Revenue Performance
Economic and Social Impact of VAT
VAT Inflation Effects
VAT Impact on Investment and Exports
Social Impact
Conclusion
The Prospect of VAT in Ethiopia
Recommendations

From the Paper:

"Most developing countries are currently dependent on external financial resources to fund their development activities. As a result, their budgetary problems become more aggravated. To change this situation, these nations should exploit and strengthen their domestic financial resource base in order to bring about sustainable development. Otherwise, it is difficult to achieve profound growth with dependence on external sources. External sources are instable. Outside investment cannot be a reliable major source of income to support the nation. This does not mean external investment from other countries like the United States is not warranted or needed as aid in developing Ethiopia's economy. Rather it is to stress that domestic resources should contribute a larger share for progress in developing countries like Ethiopia. Since foreign trade is the main source of Ethiopian government revenue, as it is in other developing countries, any fluctuation in the performance of the country's foreign trade will have a significant effect on revenue. Broadening the tax base insures the uninterrupted flow of revenue and therefore, remains a matter of high priority in Ethiopia."

More papers on VAT in Ethiopia:

• Analytical Essay # 123338 : "Motorola in Ethiopia"
• Term Paper # 104589 : "VAT in the European Union"
• Analytical Essay # 113533 : "Investing in Ethiopia"

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