Income Tax Assignment under the Ethiopian Constitution: Issues to Worry About
| Author | Taddese Lencho |
| Position | Lecturer in Law, Addis Ababa University, Faculty of Law; LL.B (AAU) |
| Pages | 31-51 |
INCOME TAX ASSIGNMENT UNDER THE ETHIOPIAN
CONSTITUTION: ISSUES TO WORRY ABOUT
Taddese Lencho ♣
If you can look into the seeds of time
And say which grain will grow, and which will not
William Shakespeare, Macbeth, Act 1, Scene 3, lines 58-59
Abstract
The revenue provisions of the Ethiopian Constitution are striking on a number
of levels. By and large, the revenue provisions do not evince conformity with
what the theories of fiscal federalism generally prescribe in the area of
assignment of revenue powers. In addition, the revenue provisions of the
Ethiopian Constitution are more detailed than their counterparts elsewhere.
And, the Ethiopian Constitution departs from the assignment formula set for
expenditure powers and prescribes a special procedure for assignment of
‘undesignated taxes’. These features of the Ethiopian Constitution raise a
number of questions and concerns. This article uses the income tax assignment
in the Ethiopian Constitution to highlight some of these questions and
concerns. There is ample evidence to show that the assignment formula adopted
by the Constitution, indeed its predecessor - the 1992 law - was motivated by
the desire to divide the power of taxation over existing taxes in Ethiopia rather
than to reinvent the wheel. However, there might be a tension between the
formula the Constitution adopts to assign tax powers and the prescriptions of
the theories of fiscal federalism. The article explores the implications of this
assignment.
Key words:
Income tax, Ethiopian Constitution, fiscal federalism, revenue assignment,
global income tax, schedular income tax
♣ Lecturer in Law, Addis Ababa University, Faculty of Law; LL.B (AAU); LL.M
(University of Michigan Law School, Ann Arbor); PhD Candidate, University of
Alabama Law School; I am grateful to all those who gave constructive comments on
the earlier drafts of this article.
32 MIZAN LAW REVIEW Vol. 4 No.1, March 2010
Introduction
With the exception of the brief federal experiment with Eritrea between 1952
and 1962, modern Ethiopia operated as a heavily centralized state until the
Dergue was removed from power in 1991 by a coalition of forces under the
Ethiopian Peoples Revolutionary Democratic Front (EPRDF), the ruling party in
Ethiopia.1 A transitional period Charter was signed immediately thereafter,
which put Ethiopia on a course of a federal-type structure. A law was passed in
1992 to distribute revenue powers between the central government and the
regional governments.2 This experiment with fiscal federalism culminated with
the promulgation of the Constitution in 1995, which is the basic law that now
regulates fiscal as well as other relations between the federal government and
the regional governments.
The fiscal provisions of the 1995 Constitution reflect the political
compromise that was reached by the dominant forces at the time of the writing
of the Constitution. However, the assignment formula adopted by the
Constitution creates a tension between what was politically and historically
desirable at the time of the adoption of the Constitution and what might
transpire in the future, particularly because of the unusual specificity of the
Constitution in this regard and because the Constitution, in its revenue
provisions, seems to disregard the importance of tax powers as instrumentalities
of economic policies of re-distribution of income and wealth and stabilization.
1 The ruling party EPRDF is a coalition of four major parties – Tigray Peoples’
Liberation Front (TPLF), Amhara National Democratic Movement (ANDM), Oromo
People’s Democratic Organization (OPDO), and Southern Ethiopian Peoples’
Democratic Front (SEPDF). These parties operate in the four major regions of the
federation, including the capital, Addis Ababa. In addition, the EPRDF has its
affiliates in all the other regions – the Afar People’s Democractic Organization in
Afar Regional State, the Somali People’s Democratic League (SPDL) in Somali
Regional State; the Gambella Peoples’ Democratic Front (GPDF) in Gambella
Regional State, the Beneshangul-Gumuz Peoples’ Democratic Unity Front (BGPDUF)
in Beneshangul-Gumuz Regional State, and the Harari National League (HNL) in
Harari Regional State; see Assefa Fiseha, “Theory versus Practice in the
Implementation of Ethiopia’s Ethnic Federalism,” in David Turton (2006, ed.). Ethnic
Federalism: the Ethiopian Experience in Comparative Perspective, East African
Studies, Addis Ababa University Press, Addis Ababa, pp. 156-157; Eshetu Chole,
‘Keynote Address’, and ‘Issues of Vertical Imbalance in Ethiopia’s Emerging System
of Fiscal Decentralization’, in Eshetu Chole (ed.,1994), Fiscal Decentralization in
Ethiopia, Addis Ababa University Press, pp. ii, 167.
2 Proclamation No. 33/1992, a Proclamation to Define the Sharing of Revenue Between
the Central Government and the National/Regional Self Governments, Negarit
Gazetta, 52nd Year, No. 7.
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