Ethiopia’s Ministry of Finance Say There will be no 2.5 percent increase to VAT
Borkena
Toronto – The Ethiopian government reportedly declined to implement an increase on Value Added Tax (VAT to make it 17.5 percent.
BBC Amharic, in a report published on Tuesday, said the government sees increasing VAT could create pressure and declined to implement the recommendation for a 2.5 percent increase.
Currently, the rate is at 15 percent.
The Ministry of Finance has published on its social media page an explanation as to why the government did not go ahead with the recommended hike in VAT.
The proposed increase will be a burden to those who are properly paying their taxes, it is said. In fact, the government also seems to think that adding tax rate could aggravate problems in connection with paying taxes “loyally.
Another potential problem the government sees is that it could negatively impact the low income section of the population. The government says basic food items and basic services are free from VAT.
Notably, there have been concerns that public protest could break out in the country as the cost of living has constantly been worsening, impacting many many millions.
UK based “Institute For Fiscal Studies” was reportedly involved in the preparation of the document based tax government collects vis-a-vis Gross Domestic Product (GDP).
Ethiopia reportedly collects 7 percent of tax compared to the country’s GDP which is indicated as less than the average in Sub-Saharan African countries. The percentage of VAT itself is said to be lower in the same context.
The recommendation to add a 2.5 percent tax, according to the source, was intended as an action plan to fix low revenue generation compared to countries in Sub-Saharan Africa.
The legislation on VAT was amended this year after three decades.
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