The House of Peoples’ Representatives (HoPR) has received the amended Tax Administration Draft Proclamation, which introduces tougher compliance measures against tax evasion while setting a definitive 10-year time limit on historical fraud investigations.
A central feature of the draft reform is a significant crackdown on cash transactions conducted without proper documentation. Under the new framework, the administrative penalty for failing to issue a legal receipt will double from 50,000 Birr to 100,000 Birr per violation. If the offense is repeated twice within a single year and is found to be intentional, it will be treated as a criminal act, subjecting the offender to prosecution. Company managers will also face personal and criminal liability if they actively collaborate in the evasion or fail to establish adequate internal controls to prevent it.
The draft bill also reshapes the tax authority’s auditing powers by introducing a clear 10-year statute of limitations for cases involving tax fraud or deliberate evasion. Under the previous law, the tax authority could theoretically launch an audit and demand back-taxes indefinitely if fraud was suspected. The new 10-year cap provides an absolute cutoff point, protecting taxpayers from open-ended historical liabilities while aligning with commercial accounting laws that require financial records to be preserved for exactly a decade. For standard, non-fraudulent cases, the reassessment window remains five years.
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To streamline the resolution of tax disputes, the draft proclamation introduces a formal Tax Mediation System. This independent, confidential reconciliation process allows taxpayers and the authority to settle disputes voluntarily through a neutral third-party mediator within a 60-day timeline.
While existing judicial pathways remain unchanged, this new alternative dispute mechanism is designed to resolve disagreements swiftly before cases escalate to formal litigation. Previously, taxpayers disputing an assessment had no choice but to navigate the costly and time-consuming Tax Appeal Commission or court system, where they are required to pre-pay 50 percent to 75 percent of the contested amount. However, to prevent abuse of the system, the draft text explicitly excludes cases involving suspected tax fraud or deliberate evasion from participating in the mediation framework.
