3) Revenue features in Ethiopia.

The Ethiopian federal system follows the conventional model of separate

provision for the division of revenue sources between the federal government
and regional governments.
The federal constitution has three lists in this regard: federal,
concurrent and regional.
In Ethiopia, the federal constitution declares that the federal government shall
levy
taxes and collect duties on sources reserved to it, and the states likewise exercise
the same
power with respect to sources that fall under their jurisdiction. Therefore the two
bodies of
government exercise their legislative and administrative powers within their
respective
taxation competences. As a result, the revenue generated from respective
sources belongs
exclusively to each level of government.
Both levels of government have the obligation to ensure that any tax is related to
the source of
revenue taxed, and tax imposed by them should not adversely affect their
relationship. If any
tax imposed by a state affects interstate commerce, the central government
intervenes.
However, in practice tax legislation is uniform throughout the country.
The largest or major source of income in Ethiopia is domestic tax which is a
mandatory payment collected from their citizens. But the most important source
of revenue for the country is import and export taxes and dues. It is exclusively
levied and collected by the federal government.
Revenue Budget
 It represents the annual forecast of revenues to be raised by government
through taxation and other discretionary measures, the amount of revenues
raised this way differ from country to country both in magnitude and structure,
mainly due to the level of economic development and the type of the economy.
In Ethiopia, the revenue budget is usually structured into three major
headings: ordinary revenue, external assistance, and capital revenue. Hence, the
funds expected from these three sources are proclaimed as the annual revenue
budget for the country. The revenue budget is prepared by the qMinistry of
Finance (MoF) for the federal government and by Finance Bureaus for regional
governments.
Ordinary revenues include both tax and not tax revenues. the tax revenues being
direct taxes (personal income tax, rental income tax, business income tax,
agricultural income tax, tax on dividend and chance wining, land use fee and
lease); indirect taxes (excise tax on locally manufactured goods, sales tax on
locally manufactured goods, service sales tax, stamps and duty); and taxes on
foreign trade (customs duty on imported goods, duty and tax on coffee export).
Non tax revenues include charges and fees; investment revenue; miscellaneous
revenue (e.g. gins); and pension contribution.
The second major item in revenue budget is external assistance. It includes: cash
grants, these are grants from multilateral and bilateral donors for different
structural adjustment programs; and technical assistance in cash and material
form. The third item is capital revenue. This could be from domestic (sales of
movable properties and collection of loans), external loan from multilateral and
bilateral creditors mostly for capital projects, and grants in the form of
counterpart fund.
4) inter governmental transfers in Ethiopia
Is an allocation by the federal government as a means of bridging the fiscal
imbalances (vertical or horizontal).
a federal form of government that is principally concerned with dividing power
between the central and the sub national government is considered as efficient
both from economic and political justifications so long as it devises mechanisms
to avoid the risks of decentralization such as erosion of accountability.
Vertical fiscal imbalance occurs when constitutionally assigned federal and state
government revenues do not match their constitutionally assigned expenditure
responsibilities. The federal government usually collects revenue either from tax
or foreign aid and borrowing which exceed its direct expenditure responsibilities.
This will create a vertical fiscal imbalance when the revenue of the federal
government is compared with the same of the regional states which do not have
substantial taxing power and borrowing power from foreign sources.
The second form of imbalance is horizontal fiscal imbalance. Regional variations in
the correspondence between revenue bases and expenditure requirements exist
in most federal systems. This inconsistency between revenue raising responsibility
and fiscal needs of government as the same level in a federation is known as
horizontal fiscal imbalance.
Types of Inter- governmental transfers.

Revenue sharing:- is a means of addressing vertical fiscal imbalance whereby one

order of government has unconditional access to a specified share of revenues
collected by another order.
Grants: Unconditional and Conditional The second means of dealing with fiscal
imbalance is grant or transfers. They could broadly be classified in to two
categories: unconditional and conditional grants. Unconditional (general purpose)
grants are provided as general budget support with no conditions attached
Conditional grants (specific purpose transfers), on the other hand, are intended to
provide incentives for governments to undertake specific programs or activities.