Income Tax Assignment under the Ethiopian Constitution: Issues to Worry About

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