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Ethiopia to Probe Windfall Gains in Petroleum Sector

The tax authority of Ethiopia is to probe petroleum distributing companies on potential windfall gains following the regular price adjustments to the price of fuel by the government.

The Ethiopian Revenues and Customs Authority will launch the investigation in the coming weeks and will levy windfall tax should it discover that the companies are earning undeclared gains from the price adjustments according to sources.  

The tax authority was notified of the windfall gains in the sector by anonymous informants who presented a study conducted on seven petroleum companies it was learned.

The companies have gained more than 150 million birr from price adjustments according to the study. The profit was primarily earned from selling fuel stocked at old prices or en-route at the time of the price change at the new prices without declaring the extra profit to the government.

The windfall tax introduced in 2010 clearly establishes that profits earned from local or international economic and political factors are not considered as regular profit and need to be declared.

The petroleum distributing companies however have been declaring the profit they earned at the time of the price adjustment as regular profit claimed the study presented to ERCA.  

The study analyzed the windfall profits from the five times the government adjusted prices in 2011. ERCA decided to launch an investigation on all petroleum distributing companies although the original investigation had only covered 7 companies.

Source: Addis Fortune