Ethiopian Tax Engine

This document explains how DemozPay implements Ethiopian personal income tax (PIT) and pension within packages/payroll. It also flags every known gap vs. the published statutes so the engineering and compliance sides keep a single honest view.

Source-of-truth statutes (informational)

• Federal Income Tax Proclamation 979/2016 — the personal income tax schedule shipped as the pilot's GLOBAL TaxRule seed.
• Public Servants' Pension Proclamation 714/2011 — public-sector pension scheme.
• Private Organization Employees Pension Proclamation 715/2011 — private-sector pension scheme. The pilot seed defaults to the private-sector 7% / 11% rates because all DemozPay launch employers are private organisations.

DemozPay does not mirror these statutes in code. The pilot rules ship as DATA in migration 20260529400000_payroll_tax_pension_rules/migration.sql. Compliance can supersede them with a tenant-specific or newer GLOBAL rule via the normal create + activate flow.

Bracket model

A TaxBracket row stores

Field	Type	Meaning
lowerBoundSantim	bigint	inclusive
upperBoundSantim	bigint | null	exclusive; null = open-topped
rateBps	int	basis points; 1500 = 15%
fixedDeductionSantim	bigint	the published "rebate"

The bracket the gross falls into computes:

tax_owed = floor(gross * rateBps / 10000) − fixedDeductionSantim

clamped at 0. The single subtraction at the end matches the way the Ethiopian Revenues & Customs Authority publishes the schedule and avoids the floating-point hazard of summing marginal portions.

Pilot seed (FITP 979/2016)

Verbatim, as it ships in the seed migration. Santim, not ETB.

Lower (santim)	Upper (santim)	Rate (bps)	Fixed deduction (santim)
0	60,000	0	0
60,000	165,000	1000	6,000
165,000	320,000	1500	14,250
320,000	525,000	2000	30,250
525,000	760,000	2500	56,500
760,000	1,090,000	3000	94,500
1,090,000	— (open)	3500	149,000

Worked example: gross = 200,000 santim (2,000 ETB).

tax = floor(200,000 * 1500 / 10,000) − 14,250
    = 30,000 − 14,250
    = 15,750 santim (157.50 ETB)

The unit test tax-rule.spec.ts → applies the 15% bracket with the 14,250 rebate asserts exactly this number.

Pension model

A PensionRule row stores

Field	Type	Meaning
employeeContributionBps	int	basis points
employerContributionBps	int	basis points
minContributoryBaseSantim	bigint?	exempt floor; null = no floor
maxContributoryBaseSantim	bigint?	ceiling; null = uncapped

Computation:

base = clamp(gross, [min, max])  // 0 if gross < min
employeeShare = floor(base * employeeBps / 10000)
employerShare = floor(base * employerBps / 10000)

Pilot seed (Proclamation 715/2011, private sector)

Field	Value
employeeContributionBps	700 (7%)
employerContributionBps	1100 (11%)
minContributoryBaseSantim	NULL
maxContributoryBaseSantim	NULL

Only the employee contribution flows into the payslip as a PENSION deduction. The employer contribution is recorded as a liability total on the calculate result (employerPensionLiabilitySantim) and will become its own outbox event payroll.employer_pension_recognised.v1 in Payroll-E3 (cross-domain consumers + accounting hooks). Today the employer liability is observable on the calc result but not yet remitted; that's a Payroll-E4 item.

Known statutory gaps (HONEST list)

Gap	Statutory expectation	Pilot behaviour	Phase to close
Pension is subtracted from taxable base BEFORE PIT	required by 979/2016 §65	pilot taxes the entire gross	Payroll-E2
Non-taxable allowances (transport, per diem, housing within limits)	required by 979/2016 §10	pilot treats all allowances as taxable; only baseSalary is read today, so allowances are absent altogether	Payroll-E2 (also needs Employee-table modelling)
"Basic salary" vs "total gross" for pension base	private-sector pension applies to "basic salary" only	pilot applies to gross	Payroll-E2
Overtime multipliers (×1.25, ×1.5, ×2 weekend/holiday)	Labour Proclamation 1156/2019	not modelled	Payroll-E2
Court-ordered deductions take priority over voluntary deductions	civil procedure	pilot has no priority order; deductions sum without ranking	Payroll-E2
Minimum-net-salary protection	implicit in Labour Proclamation	pilot fails calculation on negative net; reviewer must intervene	Payroll-E2
Monthly remittance to ERCA (tax) + POESSA (pension)	required end of month	engine computes liability but no remittance integration	Payroll-E4
Pension contribution caps for very high earners	per fund regulations	min/max fields exist on PensionRule; default seed sets both to NULL	configurable today; no enforcement of statutory caps
Public-sector vs private-sector rates	714/2011 vs 715/2011	pilot ships only private-sector seed	new GLOBAL or tenant rule via the normal create + activate flow

Why we don't hardcode bracket values

If the FITP schedule changes (raised top rate, indexed brackets, employer-specific exemption for a free-zone tenant), the change is:

1. Author a new TaxRule DRAFT.
2. Simulate against last period (Payroll-E2 will add a SimulatePayrollUnderRules use case).
3. Activate it. The aggregate refuses to activate if its effective range overlaps another ACTIVE rule for the same tenant.

The previous version stays in the database as RETIRED. Payroll runs calculated under it still resolve their snapshot pointer correctly.

There is therefore no code path that needs editing when Ethiopia changes its tax law. Compliance authors, engineering reviews, both sides keep the timeline of rule versions in the audit trail.