Ethiopia’s Dukem town tax income quadruples

Tax income of Dukem, one of industrial hubs of Ethiopia, has almost quadrupled from it was five years ago, says tax official of the town.

“The annual total tax income of Dukem town, which was 74.2 million birr, has increased to 271 million birr last Ethiopian fiscal year concluded July 7, 2019, according to Mr. Tegenu Daba, head of Dukem town tax Bureau.

“Ten years ago Dukem was a small town with 6,000 populations. Today the tow is growing fast thanks to the East Industry Zone, which has created jobs for some 20,000 people,” says Tegenu Daba, indicating that following the expansion of industries in the town, trade has also been growing over the past years.

“Even though the majority of the tax income from the industries goes to the federal government because they are structured as Private Limited Companies (PLC), Dukem town is still getting the majority of its revenue from these industries by collecting income tax from the employees. But most of all, we appreciate these industries because they have managed to create huge amount of jobs for our tow,” Tegenu told reporter.

Dukem town currently has about 500 industries in our town of which 397 are operational. Over 100 of these industries are located within Eastern Industry Zone, which is now re-named as Eastern Industrial Park.

“Even though PLCs are paying their taxes to federal governments, 30% of the revenue will be shared to the region where the industries are operating, according to the income distribution law of the country,” Tegenu says.

Cheap land leasing fee
Eastern Industrial Zone has acquired 500 hectares of land of which they developed 233 hectares. “The owner is one Chinese guy. He leased the land with a very cheap price, which is one birr per square meter. We are only collecting 2.3 million birr lease from the land he developed so far, which is very insignificant,” Tegenu says.

“The issue we are raising is that the Chinese investor is currently sub-leasing the land to other investors in dollars. We are only collecting tax for capital gain from this sub-leasing transaction. But we should have been collecting land lease fee from the companies, which are buying the land through sub-leasing using the current land lease rate of the town,” he said.

“The problem is we don’t have a legal framework, which allows us to collect lease fee as per the lease price of rate of the day from the investors who are currently sub-leasing the land,” Tegenu said, indicating that the tax officials at the federal and Oromia level are working to introduce sub-leasing law.

Inside Eastern Industry Zone
Even though Eastern Industrial Zoe has been operating for close to a decade in Dukem town, the local officials have no idea about what actually was going on inside. They were not allowed to enter the compound and see what exactly was going on.

Ethiopia’s Dukem town tax income quadruples
Ethiopia’s Dukem Town Annual Tax Income Trend – Millions of Birr – 2014/15 – 2018/19

“Today we are allowed to enter the compound and collect income tax from the employees. But two or three years ago, it was difficult for us to enter the compound. We had to get permission from the federal government. We had to go to Addis Ababa and obtain permission letter from federal investment commission,” Tegenu says, indicating that last year Dukem town has collected a total of 170 million income taxes from the employees working within Eastern Industrial Zone.

He indicated that currently the investors within Eastern Industrial Zone have realized that they need the local officials because they are the one who can quickly react to any issues the industries may face.

“Now they call us we enter whenever we have to and check the total number of employees who should be taxed and the like. But still we don’t have the capacity and staff to properly monitor the exact number of employees working within each factory and collect income tax from all the employees. We are planning to setup an office within the Eastern Industrial Zone to improve our income tax collection from the industries,” Tegenu, says.

Located at around 42 kilometers distance from the capital, Addis Ababa, it is estimated that Dukem town currently has a total population of 132,000, according to Tamirat Wordoffa, Dukem tow Mayor Office head, who indicated that some 48,000 employees are working in industries and may people coming to the town to get jobs in these industries.