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312 Diagnosing Corruption in Ethiopia
payments at the finance offices instead of deployment of tax collectors,
integration of property tax in the land allocation system, and unofficial
incentives to pay taxes. It is more difficult to determine collection rates
for rural land use fees and taxes.
The cost of collecting property taxes is minimal both in urban and
rural areas mainly because of the simplicity in the tax legislation and
concurrent collection of taxes. In rural areas, the land use fees are calculated
per hectare and administered along with agricultural income taxes.
Most important, the cost of identification and valuation, which accounts
for most of the costs in other systems, is very low in Ethiopia.
Key valuation and taxation issues that create opportunities for corruption
include the following:
• The lack of a standard valuation system and certified valuers can create
opportunities for collusion in reducing tax liabilities and can lead to
inequities in the compensation for expropriated property.
Public provision of land information. Rural areas have no maps of registered
holdings, which will be undertaken under second-level registration.
Second-level registration has been piloted only in selected sites in Amhara
and Oromia, and there is no consensus at the federal level on the standards
and specifications for second-level certification.
In urban areas, there is little mapping of registered property.
Encumbrances and restrictions are not recorded in the registers, and the
encumbrances, if registered, are listed in a separate document. Land use
restrictions are not recorded in the register.
In the four regions that have established land administration systems,
the overriding emphasis is on first-time registration, which is seen as a
one-time activity. There is little emphasis on the recording of changes in
holdings, and therefore the registers are not kept up to date.
The formal fees for registration are low. Two issues arise from this situation:
(a) Registration systems are not financially sustainable because the
only fee collected is a certificate fee in all regions except Amhara, where
no fee is collected. Hence, capital investment in the rural registry system
is low: dilapidated filing rooms with leaking roofs are typical. (b) Low
official fees provide scope for petty corruption whereby informal fees
have reportedly become “routine” in some urban contexts. In addition,
“service payments” such as witnesses to formalize informal holdings or
semilegal holding rights, significantly affect the overall cost of first-time
registration without increasing official revenue.