History has it that Ethiopia saw the first locally assembled commercial vehicle by

AMCE-IVECO. Following this path, according to a recent data from the Ministry of
Trade and Industry, nearly 20 car assembly firms are operating across the country.

Founded in 2009, the Marathon Motor Engineering, Plc. is one of the vehicle
assemblersin Ethiopia, 100% founded and owned by Ethiopians, an indigenous Auto
company.

Since establishment the company has been headed by Melkamu Assefa, Founder,
CEO and Managing Director,Proud Ethiopian, Married to Tigist Getachewand father
of three children. Melkamu has got an extensive educational and professional
experiences in the automotive industry, received his 1st Degree (BA) in Business
Management – Addis Ababa University, MBA from Leicester University, UK; he’s
certified from a Japanese Automotive professional firm.

Melkamu has also served in the renowned automotive company, MOENCO in

Ethiopia for over 14 years. Furthermore, he has received different trainings and
participated in high level convention and international conferences in more than 100
countries.ABN Editor-in-Chief Aklile Tsige speaks to Melkamu Assefa on the
company’s ten plus journey and future plan.

Humble Beginning

All began when the renowned world athletics icon Haile Gebreselassie and the
current Marathon Motor and Engineering /MME/ founder, CEO and Managing
Director, Melkamu Assefa met and discussed the idea of working together on
automotive industry in September 2008. That was a very difficult moment to embark
on such a business as there was severe scarcity of foreign currency at home due to
the then global economic crisis.

However, it was also time that our athletics hero Haile Gebreselassie achieved a
mind-blogging win in Berlin; he became the first human being in history to finish the
42 KM in less than two hours and four minutes, clocking

2:03:59.

Melkamu remembered that he couldn’t find a better name for their new venture than
“Marathon”, which could sum up their values, ambitions and goals. Thus, the
company was named after this remarkable and historical name. Marathon Motor
Engineering plc. has linked with the famous international automotive brand called
Hyundai; and so is Haile Gebresilassie. Hyundai is an extremely dynamic,
achievement-oriented and competitive; and so is Melkamu Assefa. It’s so smart to
bring these three forces together to establish a valuable trend-setting company
whose values align with that of Hyundai’s: constantly striving for enhancement in
design, performance and systems.
1
Melkamu recalled that MME’s journey together to contribute to our nation has only
begun with the vision of ''Aiming to be the Best Customer Centric Auto Retail and
Assembler Company''. Hyundai’s slogan "New Thinking, New Possibilities" always
pushes us towards availing innovative benefit to our esteemed customers and helps
us earn their trust. Hence, it cooperates with Hyundai running the erected
automobile assembly plant in Nifas SilkLafto, Addis Ababa, which had been
inaugurated in February 2019.

Next Article

from 'MODERNIZING TRANSPORT '

2
Towards Modernizing Transport

the Marathon

By Aklile Tsige Ethiopia’s automotive market is obviously dominated by second-

hand imported vehicles – particularly commercial which were Ethiopia’s second
most valuable import overall in 2019, worth US$955 million. On the other hand,
commercial vehicles are also Ethiopia’s highest earning automotive export,
according to various sources.
Advertisement

3
History has it that Ethiopia saw the first locally assembled commercial vehicle by
AMCE-IVECO. Following this path, according to a recent data from the Ministry of
Trade and Industry, nearly 20 car assembly firms are operating across the country.

Founded in 2009, the Marathon Motor Engineering, Plc. is one of the vehicle
assemblersin Ethiopia, 100% founded and owned by Ethiopians, an indigenous Auto
company.

Since establishment the company has been headed by Melkamu Assefa, Founder,
CEO and Managing Director,Proud Ethiopian, Married to Tigist Getachewand father
of three children. Melkamu has got an extensive educational and professional
experiences in the automotive industry, received his 1st Degree (BA) in Business
Management – Addis Ababa University, MBA from Leicester University, UK; he’s
certified from a Japanese Automotive professional firm.

Melkamu has also served in the renowned automotive company, MOENCO in

Ethiopia for over 14 years. Furthermore, he has received different trainings and
participated in high level convention and international conferences in more than 100
countries.ABN Editor-in-Chief Aklile Tsige speaks to Melkamu Assefa on the
company’s ten plus journey and future plan.

ABYSSINIA BUSINESS NETWORK ABN

Melkamu Assefa

Founder, CEO and Managing Director

4
Humble Beginning

All began when the renowned world athletics icon Haile Gebreselassie and the
current Marathon Motor and Engineering /MME/ founder, CEO and Managing
Director, Melkamu Assefa met and discussed the idea of working together on
automotive industry in September 2008. That was a very difficult moment to embark
on such a business as there was severe scarcity of foreign currency at home due to
the then global economic crisis.

However, it was also time that our athletics hero Haile Gebreselassie achieved a
mind-blogging win in Berlin; he became the first human being in history to finish the
42 KM in less than two hours and four minutes, clocking

2:03:59.

Melkamu remembered that he couldn’t find a better name for their new venture than
“Marathon”, which could sum up their values, ambitions and goals. Thus, the
company was named after this remarkable and historical name. Marathon Motor
Engineering plc. has linked with the famous international automotive brand called
Hyundai; and so is Haile Gebresilassie. Hyundai is an extremely dynamic,
achievement-oriented and competitive; and so is Melkamu Assefa. It’s so smart to
bring these three forces together to establish a valuable trend-setting company
whose values align with that of Hyundai’s: constantly striving for enhancement in
design, performance and systems.

Melkamu recalled that MME’s journey together to contribute to our nation has only
begun with the vision of ''Aiming to be the Best Customer Centric Auto Retail and
Assembler Company''. Hyundai’s slogan "New Thinking, New Possibilities" always
pushes us towards availing innovative benefit to our esteemed customers and helps
us earn their trust. Hence, it cooperates with Hyundai running the erected
automobile assembly plant in Nifas SilkLafto, Addis Ababa, which had been
inaugurated in February 2019.

4th largest manufacturing of vehicles in the world. Operates the world’s

largest.integrated automobile manufacturing facility in Ulsan. S Korea. In 1967
Hyundai exported 6 units of first model of Pony to Ecuador in exchange for banana.
Hyundai is the fastest auto maker company to achieve 100 million units. In 1986 it
launched its excel compact Cars in the USA. Current design philosophy is known as
“fluidic sculpture” inspired by nature.

“The main success of MME is not financial strength but high level of professionalism,
the trust and confidence of our customers in Hyundai and our company. Being open
minded and outward looking with always "Can Do Attitude" is our life journey. In
addition, Haile, whose courage and all –time winning spirit gives me the
determination and full time commitment” Reiterated Melkamu.“ “Our invisible and
5
very satisfying achievement is the job we are doing for humanity and dignity-the
corporate social responsibility we have tried to manage. The more we stretch our
hands the more prosperous we would be. That’s what we believe.”

Starting its race with ten million birr capital, few office equipment and small room 11
years ago, it seemed very difficult to compete with other similar Auto firms with
considerable and massive financial and logistics capacity. Nonetheless, MME has
unexpectedly managed to become a leading and preferable assembler in the
country. This, in deed, attributes to its customer-oriented, auto repair and far-sighted
vision.

“We have built confidence in bringing dead and forgotten Hyundai vehicles to life. I
could say we have established car clinic, making

them to appear in public.” Said Melkamu, adding that the Korean brand Hyundai is
currently the most contemporary and extraordinary automotive company that is
believed to have created a platform for knowledge transfer from Korea to Ethiopia,
and a revolution in the car market.

In order to maintain its marathon pace, MME has built the state-ofthe-art- Saris 3S
facilities as per the new Graphic Design Standard Interface of Hyundai Motor
Company which is well-equipped with technical training center, employee first aid
room, modern canteen and much more.

According to Melkamu, Marathon Motor Engineering is committed to providing more

possibilities to its esteemed customers as long as the nation’s regulatory and legal
framework allows the company, stating that the company will trade-ins cars born for
Ethiopia, supplied by and serviced by MME, leasing option for short-life projects,
facilitate financial and credit schemes in partnership with banks, test drives and
many more services.

In 2019 MME reset its vision to be a Trend-Setter Automotive company in East

Africa. More importantly, in the next two and three years it plans to fully abandon gas
driven vehicles and embark on assembling electric cars with varieties of model and
size.

This typically Ethiopian car assembler has dealt with different corporate social
responsibilities across the country. At the onset in 2011 MME managed to build up
two mobile clinics at a cost of 20 million birr in order to help combat malaria and
HIV/AIDS pandemics in rural parts of Ethiopia.

The company has also donated big van to support efforts in facilitating the
construction of the Grand Ethiopian Renaissance Dam /GERD/ besides providing
various financial and technical support to people in need, and alleviating some
societal problems witnessed across the nation. MME has provided training for young
6
interns of Universities & TVET’S is fundamental & it is always in top of our plan and
set as our life journey. MME has been providing internship in its four well equipped
technical Training centers for years & creating/offering job opportunities.

Marathon Motors, Haile Gebreselassie, has assembled its first Hyundai electric car.
And the long-distance legend presented the car as a gift to Prime Minister Abiy
Ahmed.

The company, in support of the national Traffic/Safety awareness campaign, has

sponsored a morning traffic radio show since 2013 on FM radio to create road and
traffic safety awareness as well as to prevent damages and fatalities caused by
traffic accidents. Furthermore, upon an inaugural ceremony of thestate-of-the-art
Vehicle Assembly Factory Donated Hyundai H1 12-seat minibus for Addis Ababa
City Administration Social Trust Fund to support street children in February2019.

Following Ethiopian Government’s call for COVID 19 pandemic preventive support,

Marathon Motor Engineering, Haile &Alem International and Great Ethiopian Run
has donated on one and half million Birr (Birr 1,500,000.00) on 27th March 2020. In
line with similar mission MME along with Hyundai Motor Company donated 27,000
N95 high quality personal protective masks that were imported from the Republic of
Korea.

“Our invisible and very satisfying achievement is the job we are doing for humanity
and dignity-the corporate social responsibility we have tried to manage. The more
we stretch our hands the more prosperous we would be. That’s what we

believe.” Melkamu noted.

Many people in Ethiopia view a career in auto sales as a job filled with long hours
and the need to employ hard closing techniques. However, a career in auto sales
can be very rewarding. According the CEO, MME provides consultancy service to
people or companies who want to buy vehicles; they are required to put trust on the
company whether they buy or not.

Those who are successful in auto sales understand that their success is not
dependent upon the brand of car that they sell. Success is based upon their ability to
build rapport with their customers. The days of fast-talking, hard-closing sales
professionals is over and have been replaced by the need for professionalism,
courtesy, and service.

Anyone assuming that a career in auto sales would be nothing more than a good
way to practice closing skills will find little success and much frustration. Hence, it’s
to be understood that an automotive company is not an automotive company if it is
only running a showroom, but it needs to have the following three major
7
components: sales of vehicles or mega show room, supply of spare parts and
workshop/vehicle clinic. In this regard, MME is a modern company that fulfills all
these required facilities, gearing towards ensuring customer satisfaction and trust

“A single vehicle whose life time ranges from eight to ten years is likely to emit an
estimated amount of two tons of carbon dioxide into the atmosphere. Thus,
producing and using electric cars which have zero-emission can significantly
contribute to the national efforts to combat environmental pollution and climate
change.”

Well-known that the world embarks on combating global warming through various
mechanisms, working on green development activities with focus on building green
economy, so does Ethiopia.As of July 2020, Marathon Motor Engineering already
started assembling the electric Hyundai Ioniq. Currently, Marathon Motor
Engineering is assembling 14 models of cars with Hyundai brand which makes it the
first of its kind in East Africa.

The car can be charged at home can travel 304 kilometers after fully charged. In
addition, a 50 kilowatts portable charger can also charge the car fully in 30
minutes.“Although it was hard to convince people in promoting and introducing our
first electric cars that the nation had not seen before, MME made attempts to clarify
what needs to be done; we have explained that there is household charger just like
the charger we use to recharge our cellphone.” Noted Melkamu.

Electric cars are becoming more main stream, and MME isunlikely alone in
wondering whether an electric car is right for it. As the technology supporting electric
cars (EVs) and batteries continue to improve, drawbacks such as high cost, limited
range, performance issues, long charge time, and a dearth of charging stations are
fading away.

Electric vehicles are an essential part of the UCS plan to cut the nation's oil use in
half in twenty years. Instead of searching for a gasoline station with the cheapest
prices, people can charge at home at a cheaper and much more predictable cost.

Really exciting times for Ethiopia.

Clean and renewable hydropower dominates Ethiopia’s energy generation mix,

contributing around 90% of the installed generation capacity. The electricity tariffs
are also very favorable, with residential tariffs at around $0.06/ kWh. Driving EVs in

8
Africa is a whole lot cheaper than driving ICE, . A study by AfricanEV reveals just
how good driving the Hyundai Ionic EV and several others can be in Ethiopia

The Hyundai Ioniq has been well received in Europe and in other markets where it
has been launched. A lot of pundits have been impressed with its efficiency. Bjorn
Nyland gave the Ioniq a very glowing review. Another critically acclaimed EV is the
Hyundai Kona, and to show that the transition to electro mobility is happening much
faster than most people think.

“A single vehicle whose life time ranges from eight to ten years is likely to emit an
estimated amount of two tons of carbon dioxide into the atmosphere. Thus,
producing and using electric cars which have zero-emission can significantly
contribute to the national efforts to combat environmental pollution and climate
change.”

When the production of the car increases, Marathon Motors also aims to install
charging stations across the country like gas stations. As MME CEO disclosed the
company will recently launch a new electric model along with quick charging
apparatus. However, he said this new technology demands the cooperation and
integration of various stakeholders such as

ABYSSINIA BUSINESS NETWORK ABN

the Ministry of Transport, Ministry of Finance, Ministry of Revenue, Ethiopian Electric

Utility or Service, Ethio telecom, land Administration Departments and other relevant
organs.

Speaking of the hazards gas engines caused, Melkamu noted that electric cars are
already proving to be cleaner than vehicles running on petrol. As the share of
electricity from renewable sources is set to increase in the future, electric cars will
become even less harmful for the environment.

A study released by Greening Ethiopia has recently disclosed that the capital Addis
Ababa accommodates 4.89 million tons of carbon dioxide, out of which 1.38 million
is from residential houses and 1.4 million is from road transport sector while the
remaining amount of this toxic gas is emitted from waste products and the like,
according to Melkamu.

He further illustrated that a single vehicle whose life time ranges from eight to ten
years is likely to emit an estimated amount of two tons of carbon dioxide into the
atmosphere. Thus, producing and using electric cars which have zero-emission can
significantly contribute to the national efforts to combat environmental pollution and
climate change.

9
Marathon Motor has invested half a billion birr on the assembly plant that has the
capacity to assemble 10,000 cars per annum. In Ethiopia currently about half of the
population of the country, around 50 million most of them in rural areas,do not have
access to electricity. Major cities including the capital, Addis Ababa are also been
experiencing power outage frequently.

With regard to human resources, MME believes that its advancement lies on the
competence and proficiency of its employees. So the company is committed to
enhancing human development through continuous in-house trainings and
experience sharing opportunities.

Vehicle affordability is further locked up by prohibitively high vehicle taxes of

sometimes more than 220% depending on engine

size. As taxes in Ethiopia are cumulative, excise tax is calculated on the customs
duty, surtax is charged on top of the excise tax, and customs duty and final VAT is
calculated once the surtax, excise tax and customs duty have been added. Imported
vehicles may cost as much as three times the retail price of the vehicle outside of
the country.

“MME has made splendid move in the automotive industry in Ethiopia, and now
seems to be winning the marathon race as it envisions to produce every single
component of vehicles locally at cottage industry level, creating job opportunities for
many citizens.”

During the past decade, a number of leading international automotive companies

have carried out market scoping exercises to assess the viability of Ethiopia as an
assembly hub. However, due to the limited market size, largescale investments by
these automotive firms have not yet materialized, according to sources at the
Federal Investment Commission.

Due to Ethiopia’s tax system, which subjects vehicles to tax depending on their
engine size rather than age or origin, it is often cheaper to import a second-hand
vehicle with a smaller engine size than it is to assemble a vehicle locally, despite
import taxes on these vehicles. Despite being home to the continent’s second
largest population, the overall automotive market size remains small in the short to
medium term for current and prospective assemblers and producers. However,
Ethiopia’s strong government support for industrialization and the development of
auxiliary industries coupled with a large cost competitive labor pool, and sizeable
investments in infrastructure (both physical and economic) could position the country
favorably for automotive manufacturing in the long term to service both the regional
and domestic market with price

competitive vehicles. To achieve this, clear definitions of local content need to be

developed.
10
The country’s high tax rates on vehicles reduce the affordability of vehicles,
especially given the low income of the population, and restrains the vehicle retail
market. To address this, industry stakeholders should support the establishment of
vehicle financing solutions, in order to encourage wider vehicle ownership. Taxes
should be revised to also take the age of vehicles into account in order to provide
incentives for locally produced vehicles, according to MME CEO.

Many strongly believe that government regulations, tax inconsistencies, production

output, shortage of road access, and the lack of foreign currency, finance for the
purchase of trucks and running an assembly plant are

11
MME was considered as high tax payer right after 2years of its establishment. MME
is a 12 years old young company, within the past 11 years it has been engaged and
contributed to the overall socio-economic development of the nation. The company
was awarded silver medalin 2011and Gold medal in 2012 from the Ministry of
Revenues. Since the survival of any business depends on customer, the main
purpose of every business should be satisfying its existing customers and attracting
a new customer. In this regard, MME is striving to meet the needs of its customers
who are mainly private businesses such as hotels, non-government organizations,
private investors, hospitals, celebrities and higher educational institutions. According
to Melkamu, the long term plan is not to remain as the sole importer, distributor and
assembler of Hyundai brand, but Marathon Motor Engineering aspires to become
Africa’s largest car manufacturer through tariff protection and by increasing the
number of assembling plants, coming up with uniquely Ethiopian engine car called
African.

Over the past ten plus years of service delivery MME has made splendid move in
the automotive industry in Ethiopia, and now seems to be winning the marathon race
as it envisions to produce every single component of vehicles locally at cottage
industry level, creating job opportunities for many citizens.

1.1.1 Background of the study

Taxation is imposition of compulsory levies on individuals or entities by governments. Taxes

are levied in almost every country of the world, primarily to raise revenue for government
expenditures, although they serve other purposes as well. This study is concerned with
taxation in general, its principles, its objectives, and its effects; specifically, the study
discusses the nature and purposes of taxation, whether taxes should be classified as direct or
indirect, the history of taxation, canons and criteria of taxation, and economic effects of
12
taxation, including shifting and incidence (identifying who bears the ultimate burden of taxes
when that burden is passed from the person or entity deemed legally responsible for it to
another) (Maria, et al.,2019).

In modern economies, taxes are the most important source of governmental revenue. They
differ from other sources of revenue in that they are compulsory levies and are unrequited

13
i.e., they are generally not paid in exchange for some specific things, such as particular
public service, the sale of public property, or the issuance of public debt. While taxes are
presumably collected for the welfare of taxpayers as a whole. The individual taxpayer‘s
liability is independent of any specific benefit received. There are, however, important
exceptions: payroll taxes, for example, are commonly levied on labor income in order to
finance retirement benefits, medical payments, and other social security programs—all of
which are likely to benefit the taxpayers. Because of the likely link between taxes paid and
benefits received, payroll taxes are sometimes called ―contributions‖ (as in the United
States). Nevertheless, the payments are commonly compulsory, and the link to benefits is
sometimes quite weak. Another example of a tax that is linked to benefits received, if only
loosely, is the use of taxes on motor fuels to finance the construction and maintenance of
roads and highways, whose services can be enjoyed only by consuming taxed motor fuels .
(Charles, et al ., 2019).

Definition and Concept of Taxation-It is a mode by which governments make exactions for
revenue in order to support their existence and carry out for their legitimate objectives. - it is
indispensable and inevitable price for civilized society ;without which the government would
be paralyzed Jackie (2017).

Basis of Taxation: First, Necessity-Governments cannot exist and function unless it has the
means to pay its Expenditures. Second, Reciprocal Duties–protection and support between
the state and its inhabitants Jackie ( 2017).

Nature of taxation (two fold): First Inherent –co-existing with the state. No legislation is
needed to exercise the power of Taxation, Second, legislative - only the legislature can make
tax law. Subject to constitutional limitation. The legislative taxing power includes the
authority (a) to determine the nature, object, extent, coverage and situs of tax imposition (b)
to grant tax exemptions or condonations (c) to specify to provide for the administrative, as
well as the judicial, remedies that either the government or the taxpayer may avail themselves
of in the proper implementation of the tax measure Jackie (2017).

Taxation has many limitations: First, Taxation is for public purpose- the proceeds of the tax
must be used for the support of the state or for some recognized objects of government or to
directly promote the welfare of the community. Second, Taxation is inherently legislative-
inherent power of sovereignty .Third, Taxation is territorial- that is it is exercised only within
territorial jurisdiction of the taxing Authority. A. Tax Situs Criteria a. poll taxes-residence of
taxpayer b. property tax- where the property is situated. excise tax–where the privilege is

14
exercised, taxpayer is a national of, and his residence .Fourth, Subject to international
comity-State must recognize he generally accepted tenets of international law among which
are the principles of sovereign equality among states and their freedom from suit without
their consent Jackie (2017).

An excise or excise tax is any duty on manufactured goods which is levied at the moment of
manufacture, rather than at sale. Excises are often associated with customs duties (which are
levied on pre-existing goods when they cross a designated border in a specific direction);
customs are levied on goods which come into existence – as taxable items – at the border,
while excise is levied on goods which came into existence inland Jackie (2017).

Although sometimes referred to as a tax, excise is specifically a duty; tax is technically a levy
on an individual (or more accurately, the assessment of what that amount might be), while
duty is a levy on particular goods. An excise is considered an indirect tax, meaning that the
producer or seller who pays the levy to the government is expected to try to recover their loss
by raising the price paid by the eventual buyer of the goods. Excises are typically imposed in
addition to an indirect tax such as a sales tax or value-added tax (VAT). Typically, an excise
is distinguished from a sales tax or VAT in three ways: First an excise is typically a per unit
tax, costing a specific amount for a volume or unit of the item purchased, whereas a sales tax
or value-added tax is an ad valorem tax and proportional to the price of the goods, second ,an
excise typically applies to a narrow range of products, and third an excise is typically heavier,
accounting for a higher fraction of the retail price of the targeted products.

Typical examples of excise duties are taxes on gasoline and other fuels, and taxes on tobacco
and alcohol (sometimes referred to as sin tax) Jackie (2017).

Excise tax is a hateful tax levied upon commodities, and adjudged not by the common judges
of property, but wretches hired by those to whom excise is paid. As a deterrent, excise is
typically directed at three broad categories of harm: health risks from abusing toxic
substances (thus making it a kind of sumptuary tax); typically this includes tobacco and
alcohol. Environmental damage (thus acting as a green tax); this usually includes fossil fuels
(such as petrol). Socially damaging / morally objectionable activity (thus making it a type of
vice tax or sin tax); usually this includes gambling, and can include prostitution (including
solicitation and pimping) in places where it is legal Jackie (2017).

Monies raised through excise may be earmarked to redress specific social costs commonly
associated with the product or service on which it is levied. Tobacco tax revenues, for

15
example, might be spent on government anti-smoking campaigns, or healthcare for cancer,
heart disease, vascular disease, lung disease, and so on.

In some countries, excise is also levied on some goods for purely punitive reasons. Many US
states impose excise on illegal substances. These states do not consider it to as a revenue
source, but instead regard it as a means of imposing a greater level of punishment, by opening
up convicted criminals to the charge of tax evasion Jackie (2017).

Proclamations 307/2002, 570/2008 and 610/2008 provide the legal basis for the imposition
of excise taxes in Ethiopia. According to the legislations, excise taxes are levied on locally
produced goods. So the excise tax and firm performance on excisable goods of manufactured
items has impact on it. Excise tax systems contain discriminatory taxes imposed on selected
goods.

The findings of the study have revealed that excise taxation system tax base on computation
and refund were challenged.
Year Total Total Net Return Return on Excise tax
Asset Capital Income on Asset Equity paid(billion)

2009/2010 6,950.98 12,830.44 1,415.45 20.36 11.03 0.99

2010/2011 12,454.75 17,407.91 2,022.64 16.24 11.61 1.39

2011/2012 18,583.92 13,670.85 2,260.29 12.16 16.53 1.89

2012/2013 26,525.24 3,991.99 2,133.38 8.04 53.44 2.03

2013/2014 40,086.89 5,314.14 2,082.52 5.20 39.18 2.62

2014/2015 85,793.09 2,009.03 -750.03 -1.44 -4.00 3.31

2015/2016 45,344.76 14,548.48 2,552.28 5.63 17.54 3.55

2016/2017 50,230.59 17,592.23 2,926.84 5.83 16.63 4.69

2017/2018 50,647.56 19,832.01 4,597.02 9.08 23.17 4.69

2.1.1 Rate of Excise Tax

The excise tax shall be paid on goods mentioned under the schedule of the proclamation:

1. When imported
16
 2. When produced locally at the rate prescribed in the schedule.

2.1.2 Base of computation of excise Tax

In our land, excise tax is payable to the government by local producers on production of
goods listed in the excise tax schedule attached to the proclamation and by importers on the
importation of the same goods from foreign countries. Hence, producers and importers, who
are called taxpayers for excise tax purposes, are liable to pay excise tax at specific rates in
accordance with the following bases:-

1. In respect of goods, produced locally, the cost of production; local production of goods
for sale specifically listed in the excise tax schedule accompanying the proclamation is
liable to charge of excise tax. The excise tax on such locally produced of goods is
determined based on their ‗costs of production‘. In this case, the cost of production
includes direct material cost used in the production process, direct labor cost incurred in
the production process, and manufacturing overhead costs other than depreciation cost of
manufacturing machineries. The cost of production of goods is determined in accordance
with the proper accounting principles acceptable to the tax office.

17
2. In respect of goods imported, cost, insurance and freight (CIF value) : to compute the
excise tax payable to the tax authority by a local producer/manufacturer subject to excise
tax, the cost production is multiplied by the related excise tax rate prescribed in the
Excise Tax Schedule attached to Excise tax proclamation no.307/2002.

2.1.3 Payment of Excise Tax

The excise tax shall be paid within the time prescribed according proc.307/2002 Sub-
Article/2/

1. In respect of goods produced locally, by the producer;

2. In respect of goods imported, by the importer

2.1.4 Time of Payment

According to the excise tax proclamation, excise tax on goods shall be paid under the
schedule

1. When imported at the time of clearing the goods from customs area;
2. When produce locally, not later than 30 days from the date of production.

The amendment includes some replacements of words and phrases and new added sub-
article (4) under Article 27 of the Proclamation.

18
Background Information: Maraton Motors has been a prominent player in the Ethiopian automotive
industry since its inception in the 1970s. The company has a diverse product line, manufacturing
various types of vehicles ranging from passenger cars to commercial trucks and buses. With a state-of-
the-art manufacturing facility and a robust accounting system, Maraton Motors is considered a
Category-A taxpayer.

Types of Products Manufactured: Maraton Motors produces a wide range of vehicles, including
sedans, SUVs, pickup trucks, minibusses, and heavy-duty trucks. Each product category has its own
specifications, production processes, and excise tax implications based on factors such as engine size,
vehicle weight, and intended use.

Excise Tax Records: The company maintains detailed excise tax records for each vehicle model it
produces. These records include information such as the production volume, unit cost, applicable
excise tax rates, and total tax liability for each product category. Additionally, Maraton Motors keeps
track of any exemptions or incentives granted by the government for specific types of vehicles, such as
those designed for public transportation or industrial use.

1. Production Volume: Maraton Motors records the total number of vehicles manufactured for
each model within a specified period. This includes sedans, SUVs, pickup trucks, minibusses, and
heavy-duty trucks. For instance, in January 2024, the company produced:
 Maraton 2000 Sedan: 500 units/month
 Maraton SUV 3000: 350 units/month
 Maraton Pickup 1500: 250 units/month
 Maraton Minibus 3500: 150 units/month
 Maraton Heavy-Duty Truck 6000: 100 units/month

Now, let's calculate the total number of cars sold for each model over 12 months:

 Total Maraton 2000 Sedan sold in 2022: 500 units/month * 12 months = 6,000 units
 Total Maraton SUV 3000 sold in 2022: 350 units/month * 12 months = 4,200 units
 Total Maraton Pickup 1500 sold in 2022: 250 units/month * 12 months = 3,000 units
 Total Maraton Minibus 3500 sold in 2022: 150 units/month * 12 months = 1,800 units
 Total Maraton Heavy-Duty Truck 6000 sold in 2022: 100 units/month * 12 months = 1,200 units

Now, let's sum up the totals for all models:

Total cars sold in 2022 = Total Maraton 2000 Sedan + Total Maraton SUV 3000 + Total Maraton
Pickup 1500 + Total Maraton Minibus 3500 + Total Maraton Heavy-Duty Truck 6000

Total cars sold in 2022 = 6,000 + 4,200 + 3,000 + 1,800 + 1,200 = 16,200 units

2. Unit Cost: The unit cost for each vehicle model represents the total cost incurred by Maraton
Motors to produce one unit of that particular model. This includes expenses related to raw
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 materials, labor, manufacturing overhead, and other operational costs. Unit costs may vary
depending on factors such as size, complexity, and materials used in production.

Determining the unit cost for each vehicle model produced by Maraton Motors involves a detailed
analysis of various factors such as raw material costs, labor expenses, manufacturing overhead, and
other operational costs. Since I don't have access to Maraton Motors' specific cost data, I can provide a
generalized example of how unit costs might be calculated for different types of vehicles:

1. Raw Material Costs: This includes the cost of materials such as steel, aluminum, plastics, glass,
electronics, and other components used in vehicle production. The unit cost will vary depending
on the type and quantity of materials required for each vehicle model.
2. Labor Expenses: Labor costs encompass wages, salaries, benefits, and other labor-related
expenses associated with assembling the vehicles. The unit cost may be influenced by factors
such as the complexity of assembly tasks, the skill level of the workforce, and any labor
agreements in place.
3. Manufacturing Overhead: Manufacturing overhead includes indirect production costs such as
factory rent, utilities, depreciation of machinery, maintenance expenses, and administrative
overhead. These costs are allocated to each vehicle model based on factors like production
volume or machine hours.
4. Other Operational Costs: Additional operational expenses such as research and development
costs, marketing expenses, transportation costs, and regulatory compliance costs may also
contribute to the unit cost of each vehicle model.

To illustrate, let's consider hypothetical unit costs for different types of vehicles produced by Maraton
Motors:

 Maraton 2000 Sedan: $10,000/unit

 Maraton SUV 3000: $15,000/unit
 Maraton Pickup 1500: $12,000/unit
 Maraton Minibus 3500: $20,000/unit
 Maraton Heavy-Duty Truck 6000: $30,000/unit

3. Applicable Excise Tax Rates: Maraton Motors identifies the excise tax rates applicable to each
vehicle model based on its specifications, such as engine size, vehicle weight, and intended use.
Different categories of vehicles may have different tax rates. For example:
 Sedans: 20% of unit cost
 SUVs: 25% of unit cost
 Pickup Trucks: 15% of unit cost
 Minibusses: 18% of unit cost
 Heavy-Duty Trucks: 30% of unit cost
4. Total Tax Liability: Using the production volume, unit cost, and applicable excise tax rates,
Maraton Motors calculates the total excise tax liability for each vehicle model. For example:
Total Production Volume for Maraton 2000 Sedan: 500 units Unit Cost for Maraton 2000 Sedan:
$10,000 Excise Tax Rate for Sedans: 20%
Total Tax Liability for Maraton 2000 Sedan = Total Production Volume * Unit Cost * Excise Tax
Rate = 500 * $10,000 * 20% = $1,000,000
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 Similarly, total tax liabilities are calculated for each vehicle model based on their respective
production volumes, unit costs, and applicable tax rates.

Preparation of Monthly Production Cost Report: Maraton Motors prepares a comprehensive

monthly production cost report that outlines the expenses associated with manufacturing each vehicle
model. This report includes costs related to raw materials, labor, manufacturing overhead, and other
operational expenditures. By analyzing these costs, the company can accurately determine the
production cost per unit for excise tax calculation purposes.

Monthly Production Cost Report for Maraton Motors - All Vehicle Models:

1. Raw Material Costs:

 Total raw material costs for all vehicle models.
2. Labor Expenses:
 Total labor expenses for all vehicle models.
3. Manufacturing Overhead:
 Total manufacturing overhead costs for all vehicle models.
4. Other Operational Expenditures:
 Total other operational expenditures for all vehicle models.
5. Total Production Cost per Unit for Each Vehicle Model:
 Maraton 2000 Sedan:
 Total cost: $XXX
 Number of units produced: XXX
 Production cost per unit: $XXX
 Maraton SUV 3000:
 Total cost: $XXX
 Number of units produced: XXX
 Production cost per unit: $XXX
 Maraton Pickup 1500:
 Total cost: $XXX
 Number of units produced: XXX
 Production cost per unit: $XXX
 Maraton Minibus 3500:
 Total cost: $XXX
 Number of units produced: XXX
 Production cost per unit: $XXX
 Maraton Heavy-Duty Truck 6000:
 Total cost: $XXX
 Number of units produced: XXX

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  Production cost per unit: $XXX

This summarized report provides an overview of the monthly production costs for all
vehicle models produced by Maraton Motors. By analyzing these costs and calculating the
production cost per unit for each model, Maraton Motors can accurately determine the
total production cost and make informed decisions regarding pricing, cost control, and
financial management.

Preparation of Excise Tax Return: Based on the monthly production cost report, Maraton Motors
calculates the excise tax liability for each vehicle model in accordance with the Ethiopian excise tax
laws. The excise tax return is then meticulously prepared, documenting the production volume, unit
cost, applicable tax rates, and total tax due for each product category. This return is submitted to the
Tax Authority along with supporting documentation and payment for the excise taxes owed.

To provide excise tax calculations for all of Maraton Motors' vehicle models, we'll need hypothetical
data for each model's production volume, unit cost, and applicable excise tax rate. Here's an example
for all the products:

1. Maraton 2000 Sedan:

 Production Volume: 600 units
 Unit Cost: $10,000
 Excise Tax Rate: 20%
2. Maraton SUV 3000:
 Production Volume: 400 units
 Unit Cost: $15,000
 Excise Tax Rate: 25%
3. Maraton Pickup 1500:
 Production Volume: 300 units
 Unit Cost: $12,000
 Excise Tax Rate: 15%
4. Maraton Minibus 3500:
 Production Volume: 200 units
 Unit Cost: $20,000
 Excise Tax Rate: 18%
5. Maraton Heavy-Duty Truck 6000:
 Production Volume: 100 units
 Unit Cost: $30,000
 Excise Tax Rate: 30%

Based on the provided data, we can calculate the excise tax liability for each vehicle model:

1. Excise Tax Calculation for Maraton 2000 Sedan:

 Total Tax Liability = Production Volume * Unit Cost * Excise Tax Rate = 600 units *
$10,000 * 20% = $120,000
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 2. Excise Tax Calculation for Maraton SUV 3000:
 Total Tax Liability = Production Volume * Unit Cost * Excise Tax Rate = 400 units *
$15,000 * 25% = $150,000
3. Excise Tax Calculation for Maraton Pickup 1500:
 Total Tax Liability = Production Volume * Unit Cost * Excise Tax Rate = 300 units *
$12,000 * 15% = $54,000
4. Excise Tax Calculation for Maraton Minibus 3500:
 Total Tax Liability = Production Volume * Unit Cost * Excise Tax Rate = 200 units *
$20,000 * 18% = $72,000
5. Excise Tax Calculation for Maraton Heavy-Duty Truck 6000:
 Total Tax Liability = Production Volume * Unit Cost * Excise Tax Rate = 100 units *
$30,000 * 30% = $900,000

These calculations represent the excise tax liabilities for each vehicle model produced by Maraton
Motors based on the given production volumes, unit costs, and excise tax rates.

Treatment of Excise Tax Related Irregularities: In the event of any irregularities or discrepancies in
the excise tax records or returns, Maraton Motors conducts internal audits to identify and rectify the
issues promptly. The company maintains open communication channels with tax officials and
cooperates fully during tax audits or investigations. Additionally, Maraton Motors implements
corrective measures to prevent recurrence of any excise tax-related irregularities and ensures
compliance with regulatory requirements.

The treatment of excise tax-related irregularities at Maraton Motors involves a systematic approach to
identify, rectify, and prevent such issues. Here's an overview of how Maraton Motors handles excise
tax-related irregularities:

1. Internal Audits:
 Maraton Motors conducts regular internal audits of its excise tax records and returns to
identify any irregularities or discrepancies.
 Internal audit teams review the excise tax documentation, calculations, and supporting
records to ensure accuracy and compliance with regulatory requirements.
2. Prompt Identification and Rectification:
 Upon identifying irregularities, Maraton Motors takes immediate steps to rectify the
issues. This may involve correcting errors in excise tax calculations, revising
documentation, or addressing any other discrepancies.
 The goal is to rectify the irregularities promptly to ensure accurate reporting and
compliance with tax regulations.
3. Open Communication with Tax Officials:
 Maraton Motors maintains open communication channels with tax officials. In the event
of irregularities, the company cooperates fully with tax authorities to provide any
additional information or clarification needed for resolution.

23
  Open and transparent communication helps foster a positive relationship with tax
authorities and demonstrates the company's commitment to compliance.
4. Cooperation During Tax Audits or Investigations:
 If tax authorities initiate an audit or investigation related to excise tax, Maraton Motors
cooperates fully throughout the process.
 The company provides requested documentation, facilitates access to relevant records,
and collaborates with tax officials to address any concerns or questions they may have.
5. Implementation of Corrective Measures:
 Maraton Motors implements corrective measures to address the root causes of excise
tax-related irregularities.
 This may involve enhancing internal controls, providing additional training to staff
involved in tax-related processes, or improving documentation procedures to prevent
similar issues in the future.
6. Prevention of Recurrence:
 The company takes proactive steps to prevent the recurrence of excise

Comparison with Prevailing Excise Tax Laws: Maraton Motors' excise tax procedure aligns with the
prevailing Ethiopian excise tax laws and practices. The company diligently follows the tax rates,
exemptions, and regulations set forth by the Tax Authority, ensuring accurate reporting and payment
of excise taxes for its diverse range of vehicles. Moreover, Maraton Motors stays abreast of any
changes or updates to the excise tax laws and adjusts its procedures accordingly to maintain
compliance.

Maraton Motors' alignment with prevailing Ethiopian excise tax laws and practices underscores
the company's commitment to regulatory compliance and responsible financial management. Here's
how Maraton Motors compares with the prevailing excise tax laws:

1. Adherence to Tax Rates and Exemptions:

 Maraton Motors diligently follows the tax rates and exemptions stipulated by the
Ethiopian Tax Authority for each vehicle category.
 The company ensures that excise taxes are accurately calculated based on the prescribed
rates and exemptions, thereby contributing to fair and equitable taxation.
2. Accurate Reporting and Payment:
 Maraton Motors maintains accurate records and prepares excise tax returns in
accordance with Ethiopian tax laws and regulations.
 The company ensures that all relevant information, such as production volumes, unit
costs, and tax liabilities, is properly documented and reported to the Tax Authority.
 Maraton Motors makes timely payments for excise taxes owed, contributing to
government revenue and fulfilling its tax obligations.
3. Compliance with Regulatory Requirements:

24
 Maraton Motors complies with the regulatory requirements outlined by the Ethiopian
Tax Authority, including filing deadlines, documentation standards, and record-keeping
practices.
 The company's excise tax procedures are designed to align with legal requirements,
ensuring transparency, accuracy, and accountability in tax reporting and payment
processes.
4. Adaptation to Changes in Tax Laws:
 Maraton Motors stays informed about any changes or updates to the excise tax laws
issued by the Tax Authority.
 The company proactively adjusts its procedures and practices to incorporate new tax
rates, exemptions, or regulatory requirements, thereby maintaining compliance with
evolving tax laws.
5. Cooperation with Tax Authorities:
 Maraton Motors maintains open communication channels with the Tax Authority and
cooperates fully

Conclusion and Recommendation: In conclusion, Maraton Motors demonstrates a commitment to

compliance with excise tax laws and regulations through its meticulous record-keeping, accurate
reporting, and proactive approach to addressing any irregularities. To further enhance its excise tax
procedures, the company may consider leveraging technology solutions for streamlined record-
keeping and reporting processes. Additionally, ongoing staff training and development programs can
ensure that employees remain knowledgeable about evolving tax laws and compliance requirements.
By continuously refining its excise tax procedures, Maraton Motors can uphold its reputation as a
responsible taxpayer and contribute to the growth and stability of the Ethiopian economy.

25
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