Estimated Business Income Tax Assessment of Companies with Books of Account under the Federal Tax System of Ethiopia, Law and Practice

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Date

2024-09

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Addis Ababa University,

Abstract

The presumptive tax assessment has two major areas of application. These are estimated tax assessment and standard assessment. The former applies for assessment taxpayers whereas the later applies for small and informal businesses. To express it in the other ways, standard assessment applies for category C taxpayers and estimated tax assessment for category A and B business income taxpayers. Estimated business income tax assessment is designed for taxpayers with the duty to maintain books of accounts. The standard assessment model, on the other hand, is intended to the small taxpayers who are relieved from the duty to keep books of account. The estimated business income tax assessment method is commonly applied in the federal tax system of Ethiopia. It however has not received the attention it deserves in Ethiopian legal education and the tax administration. This however needs to change instantly for the better if Ethiopia is ever going to fulfill its growing need to build a modern and efficient tax administration capable of raising the revenues generated by the economy and preventing arbitrary taxation. The existence of some income tax and tax administration laws incorporating relatively extensive provisions on estimated tax assessment under the federal tax system can be seen as one important leap in this regard. To do its own humble part, this research paper attempts to bring the concept of business income tax assessment to the spotlight by focusing on the issue of estimated business income tax assessment of companies with books of account under the federal tax system of Ethiopia. In so doing, the research shows the important areas where the Ethiopian estimated business income tax assessment rules and the practical estimated tax assessment of companies with books of account in the federal tax system of Ethiopia fall short of. It then concludes that the gaps existing in the rules and the practice are too significant to be ignored and could lead to failure in realizing Ethiopian tax policy objectives. The research finally recommends some key solutions in order to fill the gaps already identified.

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