Legal importers account for less than 1 percent

By Hayal Alemayehu

The government is losing hundreds of millions of birr which it otherwise should have been able to collect in taxes and duties from the import of mobile phones, according to observers. The number of importers who are legally bringing to the country the gadgets and pay due tariffs has dwindled to less than one percent, a recent customs data revealing the number of cell phones imported to the country indicated.

From January 1st to May 31st, only 9,657 mobile phones were imported legally whereas the Ethiopian Telecommunications Corporation (ETC) registered over one million additional subscribers, according to the Ethiopian Revenues and Customs Authority (ERCA).

Accordingly, ERCA collected 1.5 million birr in taxes and duties from the 9,657 legally imported mobile phones with an aggregate value of close to four million birr.

Had all the one million-plus new subscribers bought cell phones from legal importers, ERCA would have collected over 61 million birr in taxes and duties, according to Levi Girma Wake, general manager of BravoCom, the sole agent of Nokia cell phones to Ethiopia.

From 2005 to 2009, less than 100,000 cell phones were imported to the country legally while some five million new subscribers were registered during the same time. This has led the tax collecting authority to incur hundreds of millions of birr in lost tax and duty revenue, according to industry observers.

Legal importers of mobile phones have gone out of the market over the last two, to three years unable to compete with contraband traders who sell the cell phones for much lower prices, according to Levi.

In a bid to curb the problem, a task force comprising private traders and officials from the Ethiopian Information and Communication technology Development Agency (EICTDA), ETC and ERCA had been established several months ago.

The task force conducted a study and submitted its findings to the Ministry of Finance and Economic Development (MoFED) four months ago. The finings were expected to help the tax collecting authority to generate more tax revenue from the import of mobile phones.

The findings recommend, among others, lower duties levied on mobile phones are limited to VAT only.

“We can even compete with illegal traders if the duties levied on mobile phones are limited to VAT,” Levi said. “But with Sur tax and others bringing the total tax levied on mobile phones to 38 percent, we [legal traders] can not afford to compete.”

MoFED has, however, not yet decided on the matter.
Meanwhile, all mobile phones shops operators have been ordered to use cash registration machines some four months ago. However, a very few are using the machines currently.

“In order to use the machines there should be legal documents, including receipts in the first place,” Getu Haile, a mobile phones retailer said. “But it is very hard to find one because almost all of these cell phones make their way to the country.”

EthiopianReporter