Ethiopian Business Review

Ashenafi Endale

Ashenafi Endale

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Left in Limbo

Wednesday, 15 May 2019 06:00 Published in Topic

The Harsh Reality Facing Firms Accused of Tax Evasion and their Employees

The subject of tax evasion, which refers to illegal practices used to escape from taxation, embraces many dimensions and problems. Global Financial Integrity estimates a sum of USD285 billion economic loss occurs in developing countries a year because of tax evasion. Although the exact figure is hard to find in Ethiopia due to insufficient data and different estimation techniques, tax evasion activities remain one of the major problem in Ethiopia. Even recently, the government announced that 135 companies were implicated in tax evasion activities, totaling around ETB14 billion. However, companies which are accused of involvement in tax evasion, as well as tax experts, stress that the gaps in the tax law is costing businesses unnecessary money, on top of leaving thousands of employees jobless as EBR’s Ashenafi Endale reports.

In recent years, Africa has become the newest frontier for automotive companies from all over the world. Once majorly occupied by Chinese car manufacturers such as Hafei and Geely, Africa is now hosting car makers from Europe and the United States, including BMW, Volkwagen and Ford, all of whom are building production plants on the continent. EBR’s Ashenafi Endale explores the factors behind Africa’s automotive boom and what Ethiopia’s role as an auto manufacturing base.

Africa has become the next frontier for European and Asian car manufacturers. Adding to Ethiopia’s collection of foreign auto companies, Volkswagen signed a Memorandum of Understanding (MoU) with the Ethiopian Investment Commission in the beginning of 2019. This makes Ethiopia the third country in sub-Saharan Africa to sign an MoU with Volkswagen, following Ghana and Nigeria, which both signed MoUs with Volkswagen in August 2018. Volkswagen already has a manufacturing plant in South Africa, which has been active since 1951.

According to the MoU signed between Ethiopia and the company, Volkswagen will focus on four key pillars: the establishment of a vehicle assembly facility, localization of automotive components, introduction of mobility concepts such as app-based car sharing and ride hailing as well as the opening of a training center. Thomas Schaefer, Head of Volkswagen Sub-Saharan Africa Region, who signed the MoU, detailed his company’s intentions in Ethiopia in an email interview with EBR’s Ashenafi Endale.