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Welcome Home Blog Series: Oromos organize and build bridges to hold Ethiopia accountable for human rights abuses August 30, 2017

Posted by OromianEconomist in Uncategorized.
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Source: Welcome Home Blog Series: Oromos organize and build bridges to hold Ethiopia accountable for human rights abuses

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Taxing times for small traders in Ethiopia hit by 300% rate hike August 30, 2017

Posted by OromianEconomist in #OromoProtests, Uncategorized.
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Strikes and protests in volatile Oromia state reflect widespread anger over business tax rises as the government tries to reduce its reliance on aid

A vegetable seller at Dessie market in northern Ethiopia.
 A vegetable seller at Dessie market in northern Ethiopia. About 80% of the country’s workforce is employed in smallholder agriculture. Photograph: Ivoha/Alamy

In the dense cobblestone streets of Burayu town, outside Addis Ababa, Melaku Abdella* and his family had been making a living selling basic items such as vegetables, cooking oil and soft drinks at competitive prices from their kiosk. But after the Ethiopian government stung him with a more than 300% tax increase last month, Abdella says he was left with no option but to close the business.

Like many low-income traders in the country’s Oromia region, the family didn’t keep accounts, meaning the authorities based their annual tax demand of 7,000 Ethiopian birr (£231) on an estimate of income. “It’s beyond my capacity to pay. I will have to hand in my business licence,” Abdella says.

The hikes on grocers, barbers and cafes were met with widespread anger and protests in parts of the volatile state, which has endured unrest and fatal clashes during the last two years.

The situation creates a dilemma for a government that is desperate to increase income tax and reduce its reliance on aid, but is also wary of further instability. Ethiopia’s parliament only lifted a 10-month state of emergency earlier this month following protests over land disputes and alleged political marginalisation. The unrest since November 2015 involved security forces killing at least 600 demonstrators and tens of thousands being jailed, according to the government.

Although still one of world’s least developed countries, Ethiopia’s economy has grown rapidly in the last decade, as the government used loans, aid and tax revenue to build clinics, universities, roads, railways and hydropower dams. Its budget has increased roughly in line with gross domestic product. Ethiopia’s tax revenue is around 14% of output, according to the International Monetary Fund, which is lower than the sub-Saharan African average. This financial year, almost a third of the federal budget of 321bn birr (£10.6bn) is projected to come from aid and loans.

Ethiopia’s ruling coalition has been credited for overseeing growth and improving infant mortality and life expectancy, but it is also blamed for suppressing democratic rights, maladministration, increasing corruption and, now, the draconian tax swoop.

The root of the dispute is a sizeable semi-formal economic sector – around 80% of the workforce is still employed in smallholder agriculture – entrenched mistrust between the state and traders, and an estimation system for small businesses.

Girls on their way to school, Goba, Bale region, Oromia Region
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 Girls on their way to school, in Goba, Oromia. Photograph: Fis/imagebroker/Rex/Shutterstock

Enterprises with an annual turnover of less than 500,000 birr are not required to produce audited accounts. Instead, officials visit each premise to make an income assessment. That has set up a game of cat-and-mouse with many vendors running down stock in anticipation of the visits. The result has been a large discrepancy between what traders say they earn and what their assessments are based on, even if they made an accurate verbal declaration. “What most people tell the government is too low, so the officials don’t believe anybody. Honesty does not work,” says one Burayu business owner, who also requested anonymity.

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Oromia revenue officers take the estimation and multiply it either by 300 days for goods retailers or 360 days for services to produce a turnover estimate. Profits are calculated by applying a standard margin for each type of business, which is then taxed at marginal rates from 0% for profits of less than 7,200 birr to 35% for those earning more than 130,800 birr.

“The assessment has basic technical problems. From the selection of people to assess, to the criteria used for assessment, it does not fit into any objective presumptive tax assessment methodology. It’s just an ad hoc categorisation of taxpayers,” says business consultant Getachew Teklemariam.

At Burayu town revenue department, deputy head Samuel Tadesse explains that business owners were shocked at the new evaluations because the government hadn’t carried out an assessment for seven years.

Annual inflation shot up to 40% in 2011, but has been hovering near 10% recently. Also, last year, the tax thresholds increased. For example, the tax-exempt portion rose from 1,800 birr to 7,000, while the upper margin was previously 60,000. “They are confused because for six years they paid a similar amount,” Tadesse says.

By Lake Hora in Bishoftu town, about 50km south-east of Addis Ababa, a man in a bright yellow T-shirt and matching sunglasses repairs a door with a soldering iron and angle grinder amid a shower of sparks. He’s given up on his business after a 13,000-birr tax bill that he believes was four times what it should have been, and is using a friend’s workshop. “It’s better to be mobile, going here and there. That is better than being licensed,” he says.

Ethiopian craftsmen shut their shops to protest against tax regulations in Holeta, Oromia, in July 2017
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 Ethiopian craftsmen shut their shops to protest against tax regulations in Holeta, Oromia, in July 2017. Photograph: Anadolu Agency/Getty Images

Others in the area say the levies on small businesses are another example that the system only works for the rich, who receive favours and tax breaks. Another small business owner believes access to jobs, land and controlled commodities such as sugar requires loyalty to the ruling party. The welder thinks the government wants the extra revenue to buy weapons – one of a number of conspiracy theories about the tax policy, testament to the extent of Oromo discontent, and the difficulty the authorities will have implementing unpopular policies. Protests over the tax, which closed businesses in July, have merged with other grievances and led to widespread strikes in Oromia last week.

Back in Burayu, rather than risk an unaffordable tax demand next year, Abdella says he will try to support his family by working in the construction industry. He has no faith that the ruling coalition will change its ways to make life easier for small businesses. “I don’t think there will be a solution if this government stays,” he says.

*Name changed to protect identity


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DW: Qatar-Gulf crisis spreads to Africa August 30, 2017

Posted by OromianEconomist in Africa, Horn of Africa Affairs, Uncategorized.
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Odaa Oromoooromianeconomist

Qatar-Gulf crisis spreads to Africa

 By Martina Schwikowski,  DW, 29.08.2017

The Qatar-Gulf crisis is now affecting Africa after Saudi Arabia called on a number of countries, including Somalia, to join its boycott of Qatar. However, not every country is prepared to obey orders from Riyadh.

Mohamed Abdullahi Farmajo

Somalia has maintained good relations with Qatar despite Saudi Arabia, the United Arab Emirates, Egypt, and Bahrain continuing to demand that the Mogadishu government break off relations with the Gulf emirate. Still, Somalia won’t give in to pressure.

Instead, Somalia’s president, Mohamed Abdullahi Mohamed, has called on all countries involved to engage in a dialogue. Much to the annoyance of Qatar’s neighbors, he is even allowing Qatari planes to pass through Somali airspace.

Read more: Gulf crisis engulfs Africa

In doing so, Somalia is weakening the boycott imposed by the other four countries, which closed their borders to Qatar in June, followed by a breaking off of diplomatic relations and a blockade. They have accused the Qatari government of supporting terrorist organizations and demand that they sever all ties with the Muslim Brotherhood and withdraw Turkish troops from the emirate. However the emir of Qatar, Sheikh Tamim bin Hamad al-Thani, has insisted on maintaining his country’s sovereignty.

Saudi Foreign Minister Adel al-Jubeir (L) meets with his United Arab Emirates, Egyptian and Bahraini counterparts to discuss the diplomatic situation in July 2017 Saudi Foreign Minister Adel al-Jubeir (L) meets with his counterparts from the United Arab Emirates, Egypt and Bahrain to discuss the diplomatic situation in July 2017

Somalia aligns with Qatar

Somalia’s neutrality is being tested. The country has so far had a good relationship with Saudi Arabia, its biggest trade partner in the Gulf region. In return, Somalia’s president has been supporting Saudi Arabia in the war in Yemen. Saudi Arabia and the United Arab Emirates have offered the government in Mogadishu an additional 68 million euros ($81 million) to participate in the boycott of Qatar.

Nonetheless, the Somali president sided with Qatar. One possible reason is that Qatar is rumored to have financed his election campaign. “Mohamed Abdullahi Mohamed would not have become president otherwise,” Somali political expert Muhyadin Ahmed Roble told DW. “The elections were decided by the amount of money each candidate offered to parliament.” Somalia’s political elite is closer to Qatar, he says. It was the president’s chief of staff who initiated the contact with Qatar, and who has influenced the president to remain neutral in the conflict.

Border conflict reignited

Tensions also remain heightened because the United Arab Emirates is exerting more influence in the regions of Somaliland and Puntland. Both regions have declared their independence; however, the government in Mogadishu still considers them part of Somalia. The United Arab Emirates is building ports there and wants to establish a military base.

Read more: Qatar changes anti-terror legislation amid Gulf crisis

The Qatar side of the Abu Samrah border crossing with Saudi ArabiaThe Qatari side of the Abu Samrah border crossing with Saudi Arabia

The governments of both regions maintain a strong interest in Saudi Arabia and view it as a future financial supporter. “The president doesn’t like the power games going on there, but he made the mistake of not consulting the regional governments,” says Muhyadin Ahmed Roble. “Their economies are stronger; Somalia is still recovering after 20 years of civil war.”

The situation in the Horn of Africa has been aggravated following the flare-up of an old border conflict in June. For seven years, the contested border between Eritrea and Djibouti was secured by peacekeepers from Qatar. When the Gulf crisis began, Qatar withdrew its troops – approximately 450 soldiers – from the Eritrean border, ending its role as mediator between the two countries. Eritrea immediately occupied the unmanned border zone northeast of Djibouti. “Eritrea doesn’t want to back down. That could lead to even greater tension between the three countries,” warns Muhyadin Ahmed Roble.

Tensions rise in West Africa

All countries involved in the Qatar conflict have taken different sides. “Eritrea and Djibouti have supported the Saudis and the United Arab Emirates; only Somalia and Ethiopia remain neutral,” says Muhyadin Ahmed Roble. He adds that, in the regional power game, Saudi Arabia and the United Arab Emirates are in a much stronger position than Qatar, as Qatar only has good relations with Somalia.

But West Africa is also affected by the Gulf crisis. Saudi Arabia has called on the countries in the Sahel zone to make their position clear. Chad has sided with Saudi Arabia, informing the Qatari ambassador that he and his employees had to leave the country immediately. The government also recalled its diplomats from Qatar. “Chad fears instability, which is a real threat,” says Abdoulaye Sounaye, a research fellow at the Leibniz-Zentrum Moderner Orient in Berlin. “We know for certain that jihadist movements in Libya are being supported by Qatar. Chad fears the Chadian rebels who are active in Libya.”

Senegal, on the other hand, maintains contact with Qatar due to a longstanding relationship. “Senegal is a special case. The country has excellent economic relations with Qatar and profits considerably from Qatari investment,” says Sounaye, adding that Senegal was better positioned than other countries, and could act according to its own interests. However, other Sahel countries have more to lose if they choose to cut their ties with Saudi Arabia. They’ve been cooperating with the Gulf kingdom for decades – but not with Qatar.