https://orcid.org/0000-0001-5864-400X
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ABSTRACT
Taxation practices are embedded in a complex web of institutional and social factors, norms and values, some of which encourage, some of which depress tax compliance. Rather than simply constituting a revenue generating practice, taxation also represents a powerful tool to govern citizens. Studying the everyday practices of paying taxes means analysing how tax rules are applied, respected, contested and subverted in real life. Contributing to a growing canon on the social practices of taxation, this article asks: How do small- and medium-sized business owners navigate their relationship with tax authorities and attempt to make sense of their compliance and non-compliance? Through an in-depth study of the everyday practices of taxpaying in Ethiopia’s capital Addis Ababa using interviews with business owners, this article demonstrates that taxpayers apply two different forms of reasoning to describe their taxation practices, a business logic and an emotional response. Taxation practices are governed by the double aim of reducing the financial, as well as the emotional burden associated with paying taxes.
Acknowledgements
The data collection for this article was conducted with the help of Biniyam Negash (research assistant) and with the cooperation of the Institute of Strategic Affairs in Ethiopia. We are also grateful for the many comments we have received from Adrienne LeBas, Samuel Sharp, Ane Karoline Bak, Anne Mette Kjær, Pär Zetterberg, Abduletif Idris Kedir, Anders Sjögren, Joakim Kreutz, Juan Diego and Simon Pierre Boulanger Martel, including the anonymous reviewers at JEAS, which have helped us improve the manuscript.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 Interview, Advisor to the Government in Macroeconomic Policies, 20 February 2020.
2 Interview, Advisor to the Government in Tax Issues, 24 February 2020.
3 Interview, Owner of Construction Company, 21 February 2020.
4 Fjeldstad et al., “People’s Views of Taxation in Africa”; Boucoyannis, “No Taxation of Elites, No Representation”; Liebermann, “National Political Community and the Politics of Income Taxation.”
5 Andersen et al., “State Capacity and Political Regime Stability.”
6 Johansson, “Taxes for Independence”; Goodfellow and Owen, “Thick Claims and Thin Rights”; Gatt and Owen, “Direct Taxation and State-Society Relations in Lagos, Nigeria”; Söderström, “Taxation an Everyday Political Practice”, Söderström and Wangel, “Public Channels of Access”.
7 World Bank Group, “Tax Revenue (% of GDP) – Ethiopia, Sub-Saharan Africa | Data.”
8 Mengistu and Mascagni, “Data on Wages in Low-Income Countries.”
9 Shimeles et al., “Taxman’s Dilemma.”
10 Waiswa et al., “Public Sector Taxation in Ethiopia.”
11 Shimeles et al., “Taxman’s Dilemma”; Waiswa et al., “Public Sec-tor Taxation in Ethiopia.”
12 Abbink and Hagmann, Reconfiguring Ethiopia; Emmenegger, “Decentralisation and the Local De-velopmental State”; Lefort, “Free Market Economy, ‘Developmental State’.”
13 Pellerin, “The Aspiring Developmental State.”
14 Fjeldstad et al., “People’s Views of Taxation in Africa”; Bates and Donald Lien, “A Note on Taxation.”
15 Fjeldstad et al., “People’s Views of Taxation in Africa,” 34.
16 Mann, “The Autonomous Power of the State.”
17 Chandhoke, State and Civil Society, 65.
18 Lund, “Rule and Rupture.”
19 Varming, “Contested Practices of Trade and Taxation”; Björklund Larsen, A Fair Share of Tax; Martin et al., The New Fiscal Sociology; Lamb et al., Taxation.
20 Oats, Taxation, 5.
21 Twijnstra et al., “Trade Networks and Practical Norms of Taxation.”
22 Yesegat et al., “Tax Compliance Costs in Developing Countries.”
23 Shimeles et al., “Taxman’s Dilemma.”
24 Atnafu et al., “Perceptions of Value Added Tax Filing and Invoicing Compliance.”
25 Assfaw and Sebhat, “Analysis of Tax Compliance and Its Determinants.”
26 Mengistu et al., “Tax Evasion and Missing Imports.”
27 Lavers, “Aiming for Universal Health Coverage through Insurance in Ethiopia”; Hauge, “African Industrial Policy in an Era of Expanding Global Value Chains”; Clapham, “The Ethiopian Developmental State.”
28 Emmenegger et al., “Decentralization to the Household”; Planel, “A View of a Bureaucratic Developmental State.”
29 In 2018 ERCA was divided into the Ethiopian Ministry of Revenues and the Ethiopian Customs Commission.
30 Atnafu et al., “Perceptions of Value Added Tax Filing and Invoicing Compliance.”
31 Mengistu et al., “Tax Evasion and Missing Imports.”
32 Getachew, “Turnover-Based Presumptive Taxation.”
33 Gobena and Van Dijke, “Power, Justice, and Trust.”
34 Bongwa, “Taxing the Hard to Tax.”
35 In 2019, three of the coalition members merged the EPRDF into the Prosperity Party (PP) and added several other regional parties.
36 Jima, “Vicious Circle of Ethiopian Politics.”
37 Workneh, “Social Media, Protest, & Outrage Communication in Ethiopia.”
38 Mumbere, “Pay Your Taxes, Love Your Country.”
39 Ethiopian Embassy Washington (blog), “PM Abiy Launches National Tax Revenue Movement.” 21 December 2018. https://ethiopianembassy.org/pm-abiy-launches-national-tax-revenue-movement-december-21-2018/; Fana Broadcasting, “Prime Minister Abiy Ahmed Recognizes Loyal Taxpayers.” 21 October 2021. https://www.fanabc.com/english/prime-minister-abiy-ahmed-recognizes-loyal-taxpayers/; Ethiopian Monitor, “Ethiopia Recognizes 300 Loyal and Transparent Taxpayers,” 22 October 2021. https://ethiopianmonitor.com/2021/10/22/ethiopia-recognizes-300-loyal-and-transparent-taxpayers/.
40 Ethiopian Citizen, “Ethiopia Tightens Grip on Tax Collection amid Disinformation Campaign,” 11 May 2021. https://www.ethiopiancitizen.com/2021/11/ethiopia-tightens-grip-on-tax-collection-amid-disinformation-campaign.html; NewBusinessEthiopia.com, “Ethiopia Secures $4.6 Billion from Tax – New Business Ethiopia,” 15 March 2019. https://newbusinessethiopia.com/finance/ethiopia-secures-4-6-billion-from-tax/.
41 While it is possible that the economic crisis following the 2020 Covid-19 pandemic has contributed to the decline in 2020, already in 2019, tax to GDP ratio had declined to by 0.8% in comparison to 2018.
42 See also Yanow, “What’s Political about Political Ethnography?”; Schatz, Political Ethnography; Gee, “Meaning Making, Communities of Practice, and Analytical Toolkits.”
43 In Ethiopia business taxpayers are categorised according to their income from A (above 1,000,000 birr per year), B (between 500,000 and 1,000,000 birr) to C (below 500,000 birr per year).
44 Proclamation No. 979, Federal Income Tax Proclamation.
45 Proclamation No 308, Turnover Tax Proclamation.
46 Proclamation No. 979, Federal Income Tax Proclamation.
47 VAT in Ethiopia amounts to 15% and is applied to goods and services apart from those exempt from VAT.
48 Turnover tax applies to small businesses not registered for VAT. Under the value of 500,000 birr, businesses are required to pay 2% from annual taxable transactions on goods sold and 10% on service rendered locally.
49 Proclamation No 308, Turnover Tax Proclamation; Proclamation No 1157, VAT (Amendment) Proclamation.
50 Shimeles et al., “Taxman’s Dilemma.”
51 Temin and Badwaza, “Aspirations and Realities in Africa.”
52 Pellerin, “The Politics of Public Silence”, 67ff.
53 Interview, Owner of Construction Company, 21 February 2020.
54 Interview, Adviser to the Government on Taxation, 24 February 2020.
55 Shimeles et al., “Taxman’s Dilemma.”
56 Interview, Business Owner Accounting Firm, 9 April 2020.
57 Interview, Representative of Business Association, 19 February 2020.
58 Interview, Business Owner Consultancy Firm, 19 March 2020.
59 Interview, Business Owner Construction Company, 21 February 2020.
60 Interview, Business Owner Mobile Maintenance Shop, 4 March 2020.
61 Interview, Business Owner Construction Company, 11 April 2020.
62 Interview, Business Owner Mobile Maintenance Shop, 4 March 2020.
63 Interview, Business Owner Shoe Manufacturing Firm, 13 March 2020.
64 Interview, Business Owner Consultancy Firm, 19 March 2020.
65 Interview, Business Owner Coffee Shop, 5 March 2020.
66 Interview, Business Owner Construction Company, 11 April 2020.
67 Interview, Business Owner Consultancy Firm, 19 March 2020.
68 Interview, Business Owner Import and Retail Company, 13 April 2020.
69 Interview, Business Owner Construction Company, 11 April 2020.
70 Interview, Business Owner Import and Retail Company, 13 April 2020.
71 Interview, Business Owner Restaurant, 28 April 2020.
72 Interview, Business Owner Mobile Maintenance Shop, 22 April 2020.
73 Interview, Business Owner Import and Retail Company, 13 April 2020.
74 Interview, Business Owner Electronics Shop, 22 April 2020.
75 Interview, Business Owner Import and Retail Company, 13 April 2020.
76 Interview, Business Owner Car Rental, 11 March 2020.
77 Interview, Business Owner Shoe Manufacturing Firm, 13 March 2020.
78 Interview, Business Owner Electronics Shop, 22 April 2020.
79 Interview, Business Owner Import Firm, 7 April 2020.
80 Interview Business Owner Construction Company, 21 February 2020.
81 Interview Business Owner Mobile Maintenance Shop, 4 March 2020.
82 Interview, Business Owner, Shoe Sole Manufacturer.
83 Interview, Representative of Business Association, 19 February 2020; Interview, Advisor to the Government in Macroeconomic Policies, 20 February 2020; Interview, Business Owner Electronics Shop, 22 April 2020.
84 Interview, Business Owner Mobile Maintenance Shop, 4 March 2020.
85 Interview, Business Owner Construction Company, 21 February 2020.
86 Interview, Business Owner Shoe Manufacturing Firm, 13 March 2020.
87 Interview, Business Owner Construction Company, 11 April 2020.
88 Ibid.
89 Ibid.
90 Interview, Business Owner Mobile Maintenance Shop, 22 April 2020.
91 Interview, Business Owner Import Firm, 7 April 2020.
92 Interview, Business Owner Shoe Manufacturing Firm, 13 March 2020.
93 Interview, Business Owner Mobile Maintenance Shop, 4 April 2020.
94 Interview, Business Owner Import and Retail Company, 13 April 2020.
95 Interview, Business Owner Construction Company, 11 April 2020.
96 Interview, Business Owner Accounting Firm, 9 April 2020.
97 Interview, Business Owner Stationary Shop, 9 March 2020.
98 Interview, Business Owner Consultancy Firm, 19 March 2020.
99 Interview, Business Owner Construction Company, 21 February 2020.
100 Interview, Business Owner Coffee Shop, 5 March 2020.
101 Interview, Business Owner Construction Company, 11 April 2020.
102 Interview, Business Owner Accounting Firm, 9 April 2020.
103 Interview, Business Owner Construction Company, 11 April 2020.
104 Interview, Business Owner Electronics Shop, 22 April 2020.
105 As has been shown elsewhere, emotion is not the opposite of rationality, and in fact much work has demonstrated how emotions fuel various cognitive processes, see e.g. Söderström, “Fear of Electoral Violence”.