According to information obtained from the Ministry of Finance, a strict provision has been included in the new draft amendment to the Tax Administration Proclamation that prohibits taxpayers from presenting new evidence during the appeals process other than what they submitted during the audit phase.
This means that if a business entity or a merchant fails to produce a crucial expense document, a bank statement, or a copy of a receipt during the audit—whether because it was missing or overlooked—and finds it later, their right to present it as new evidence to reduce the hefty tax levied against them will be completely restricted.
Critics argue that this approach contradicts the practical realities of business operations on the ground. It particularly overlooks the fact that when abrupt financial audits are conducted on records that are four or five years old, documents can easily be misplaced, forgotten, or lost due to high employee turnover, office relocations, or unforeseeable circumstances beyond control, such as theft or fire.
Furthermore, it is pointed out that even in scenarios where the documents in question are actually in the hands of the tax authority itself, rejecting them later simply because they were not presented at the exact time of the audit—deeming them "new evidence"—is a highly unbalanced practice that deprives taxpayers of their right to properly defend themselves in a court of law.
On the other hand, the explanation provided by the government for this firm stance indicates that rather than completely banning new evidence, the law aims to prevent taxpayers from repeatedly delaying disputes without a valid reason and to reduce the high administrative burden of tax management.
Consequently, the new draft proclamation outlines three primary criteria under which new evidence may be accommodated in exceptional cases:
First: When it is proven that the failure to consider the document would impose an excessive and unbearable tax liability on the taxpayer.
Second: When it is established that the taxpayer was only able to obtain the new document after the final tax assessment was fully issued.
Third: When it is verified that the document was not presented during the audit due to a compelling force majeure (circumstances beyond their control).
If these three criteria are met and the new evidence is accepted, the taxpayer will still be required to pay an additional 20% penalty on the tax liability for failing to submit the documents on time. This approach has been described as a regulatory mechanism designed to compel taxpayers to maintain their financial records and data meticulously from the very beginning, rather than acting like a student who only looks for their notebook after the exam results are announced.
On the other hand, another provision in the draft proclamation that has triggered widespread panic is the doubling of the financial penalty imposed on taxpayers who fail to issue receipts, setting the fine at 100,000 Birr for each unissued receipt.
This means that if a merchant fails to issue just five receipts due to negligence, a staff error, or any other reason, the cumulative stacked penalty will reach half a million Birr. This has drawn sharp criticism as an extremely severe penalty that lacks a scientific standard and could directly push businesses into bankruptcy and closure.
Although the government states that this penalty hike is intended to penalize and reform lawbreakers while serving as a deterrent to prevent others from committing similar infractions, there is a widespread fear regarding the current market reality. Critics warn that such a disproportionate financial penalty could create massive psychological pressure and anxiety within the business community. Instead of fostering a tax system built on mutual trust with the government, it might inadvertently drive merchants away from compliance and into the informal economy.
