Legal and Practical Issues Relating to Capital Gains Tax: The Case of Addis Ababa City Administration

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Addis Ababa,University


Capital gains tax (hereinafter CGT) is a tax imposed on the disposal of capital assets like buildings, shares, bonds, minerals, and petroleum rights or information. To effectively implement CGT, legal and practical problems should be resolved properly. In Ethiopia, the problem with CGT commences from the power of taxation of CGT. The Federal Democratic Republic of Ethiopia (hereinafter FDRE)Constitution which in detail illustrates the taxation power of federal and Regional Governments fails to expressly designate CGT. Nevertheless, both the Federal Government and Addis Ababa City Administration (hereinafter AACA) are imposing CGT. That being the case, there are practical and legal problems concerning CGT. This thesis specifically studies the legal and practical problems in AACA, the constitutional and legal basis of the city administration to impose and collect CGT. To appropriately address all issues both doctrinal and qualitative methods of conducting research have been used. Hence, domestic laws, national and international documentshave been consulted. The finding reveals that there is no constitutional ground for the Federal Government and AACA to impose CGT. It also discloses key legal and practical problems concerning the valuation of capital assets, deduction of costs, inflation adjustment, and inconsistency between different laws, and the like. Most of the practical problem arises due to lack of awareness. The problems cause the government to lose a significant amount of revenue, as well as affect taxpayers' legal rights. Based on the finding, the thesis recommends the designation of CGT by the joint House of Federation (hereinafter HoF) and House of People Representative (hereinafter HPR). The practices and laws that affect CGT's effective implementation should be reconsidered, and serious awareness creation should be made to the tax collecting officers and the taxpayers.



Legal and Practical Issues Relating to Capital Gains Tax: