[Rental Income Tax System and Rental Income Tax Administration in Ethiopia: The Law and Practice in Debre Birhan Town]

Abstract

Though rental income tax is one of the most important revenue sources of governments, the way it is designed and administered is affected by gaps in equitability, fairness and effectiveness. This paper tries to analyze the scheduler structures of the rental income taxation of properties under the federal and ANRS tax laws with respect to the practical implementations and their problems in general and particularly in Debre Berhan Town by analyzing these laws and by assessing the practice. The paper has investigated the rationality of rental income taxation of properties under different schedules with different rules of determining taxable rental income and tax rates; and the scope of the rental income taxation of properties under each of the schedules. The study shows that the rental income tax treatment of properties under different schedules with different taxation rules and rates affect the equitability, fairness, and effectiveness of the income tax system and administration. This paper submits that tax law related to rental income taxation of properties need to be revisited so as to enhance rental income tax equitability, fairness, and effectiveness. Finally, it concludes by providing recommendations and conclusions.