By Teweldeberhan Gebre
On December 26 2016, I posted an informative article on the subject of taxation system titled “Eritrea Needs a New Tax System” also posted in Madote.com. As I decided to respond to some of the comments provided on Madote.com on the subject by fellow Eritreans it is appropriate to thank all those all involved and Madote for the opportunity. I wish I could respond to all the comments and suggestions posted in Madote.com. However, for the sake of time and space while my thanks goes to all those took part in the discussions I will limit my response to two chatters by the name Berhane and Eritrawee. While Berhane argues taxing bank payments, transfers, financial transactions, and bank withdrawals cannot work in Eritrea, Eritrawee asks on the possibility of reforming the “2% diaspora tax”.To begin with Berhane’s comment while I fully agree with his points on people’s general tendency to evade tax, modernization of the banking sector, and the need for commercial code. However, I respectfully disagree on his view that my proposed tax system encourages cash transaction. No it is not. I say this for the following reasons:
Berhane • 4 days ago
This is encouraging to see a fresh idea in this website and in regards to Eritrea.
I read the above article and I think while the content is good I don’t think the method would work in Eritrea. My reasoning is that, first and foremost humans don’t like to pay tax, therefore the method will encourage a cash basis transaction in the informal markets and majority service industries. Second, it requires a sophisticated system whereby banks are able to do things on millions of transactions a day….we have a long way to go to get there.
I agree with the author with his assertion that GOE must encourage entrepreneurial culture where SMEs flourish and use the traditional tax collection system, the tax revenue will increase exponentially in the next 5 years.
In 2017, to encourage entrepreneurial culture GOE must introduce a new commercial law and further banking system reforms to encourage investors primarily Eritreans. I believe these two areas are crucial steps in the right direction. The agro value add industry should be encouraged and a policy to this end coupled with emphasis on implementation will see the proper use of all the micro dams that have been built and some still under construction. I ask GOE to implement the commercial law ASAP. And to stick to the economic plan that is already drawn in 94/95.
To all the Madote congratulate and admin.
Have a wonderful holiday season and may the New Year become the beginning of the Eritrean economic success. Amen to that.
Another comment is by Eritrawee on the “2% diaspora tax” read as:
Eritrawee • 6 days ago
This is very interesting topic. We need people like Mr. Teweld to help us understanding our country economy and politics with balance view. I would like to see Mr. Teweld to help the GOE to reform the diaspora tax. The 2% diaspora tax is not working and need some change to help all the people to pay. I do not see the government would be able to collect 10 to 25 years unpaid individual tax with the old way. This 2% need a real reform I hope Mr. Teweld would lighting us up with his knowledge.
Unless the “2% diaspora tax” purpose is political, economically its contribution is minimal. We all understand that taxation comes with transparency and accountability of governments to tax payers. Most people question the diaspora tax not because of its legitimacy and its burdens on the tax payers. Of course, it is a burden because it involves double taxation elements. But, I think that is not an important question for Eritreans in the diaspora. The question is they don’t have any idea how and where this tax income is used. I believe Eritreans desire to do more to their country provided there is transparent and accountable usage of the tax. The GoE has failed to address concerns by the diaspora and the skeptical international communities about the “diaspora tax”. In my humble view it is time to come up with a new approach for the diaspora to contribute to nation building. My ideas are the following:
Another method to involve the diaspora in nation building is project based approach. In this approach the government or the mass organizations such as NUESY, NUEW, and national disabled associations can come up with project proposals and appeal for funding by the diaspora communities. For instance, the government right now is involved in rural housing. Thus, the diaspora can be practically involved in rural housing projects provided the government comes with proposed housing projects in the rural area and appeals to the diaspora.