Adjudication of Tax Disputes within the Tax Authority in Ethiopia: Critical Reflections on the Law and the Practice

Abstract

The experiences of various countries clearly demonstrate that the tax authority is vested with adjudication of tax disputes arising between taxpayers and itself when a taxpayer does not accept the decision of the authority. In Ethiopia, the 2016 Federal Tax Administration Proclamation (hereinafter FTAP) has unequivocally provided that if a taxpayer is aggrieved by a tax decision of the tax authority and if he wants to challenge that decision, he is compelled to take his grievance to the Review Department of the Tax Authority- an authority accountable to the Ministry of Revenues, which itself is the successor of the former Ethiopian Revenues and Customs Authority (ERCA). Before the coming into force of the FTAP, taking a tax case to the Review Committee of ERCA was not mandatory while the FTAP has clearly provided that taking a tax case to the Review Department is mandatory. This shows that the role of the Review Department has become more influential on the taxpayer as compared to its predecessor- the Review Committee. Therefore, it is imperative now to investigate the review power of the Department and the overall process of tax dispute resolution within the tax authority. This piece is, therefore, aimed at critically examining the process of tax dispute resolution at the Review Department of the Tax Authority at federal level. This study has found out that there are certain meaningful improvements made by the FTAP that enhance access to justice to the taxpayer and the fairness of the process. Nevertheless, the study has revealed several shortcomings in the FTAP including lack of clearly defined scope of review power of the Review Department; absence of clear provisions dealing with appointment, composition and removal of members of the Review Department; absence of unequivocally articulated right to be heard before the Review Department; that FTAP does not seem to have given sufficient time to taxpayers to lodge an application and that it has not provided exceptional circumstances where the tax authority should bear burden of proof. Therefore, the author recommends that the problems identified needs to be addressed by amending the FTAP.