WASHINGTON-based International Finance Corporation (IFC), the private sector funding arm of the World Bank, is providing advisory services to Ethiopia to undertake business tax reforms to improve both revenue receipts and investment climate in the country.

In a recent disclosure, IFC says the scope of assistance include reducing the time and costs of dealing with business taxes, and broaden the tax base by increasing the number of small businesses registered for tax purposes.

Specific work stream include measuring and benchmarking compliance costs starting with a mapping of all key tax procedures combined with a survey of compliance costs and informality to determine the key bottlenecks, as well as the root causes for noncompliance.

IFC would also help Ethiopia improve the presumptive tax regime. This initiative would require simplifying existing schedule and re-assessing presumptive methods, based on transparent and adequate criteria, with the objectives of improving voluntary compliance, spur formalization and broadening the tax net. This would additionally include developing training materials for small taxpayers in bookkeeping and accounting practices and tax compliance as well as strengthen Ethiopian Revenue and Customs Authority (ERC A) communications.

This advisory project also provides for strengthening the implementation of a risk-based approach to auditing, with the objective of rationalizing the administrative efforts of Ethiopian Revenue and Customs Authority (ERC A), as well as minimizing inspections-related costs on compliant taxpayers.

The project, which is slated for completion by 31December 2015, also includes review of the fiscal incentives regime and its impact on tax expenditure (i.e. revenue forgone through tax exemptions) with the objective of limiting revenue leakage and improve transparency and simplicity in incentives administration.

Under a separate disclosure, it said IFC, BNP Paribas and other commercial lenders are jointly considering establishing a trade finance facility of up to US$ 400 million to finance importation of refined oil products in Ethiopia. The facility will provide an international energy trading company w ith an import finance facility to maintain the supply of oil products in Ethiopia over a period of up to two years. This facility will help secure fuel supply to the second most populated country in Sub-Saharan Africa and one of the fastest growing economies in Africa.

A steady supply of fuel through reliable channels is critical to ensure a better pricing, and therefore control inflation. Of the total facility amount, IFC's exposure will be up to US$ 75 million through a risk sharing arrangement.