The Ministry of Revenue made amendment on  Excise Tax Proclamation on may 22/2023

 

 

Ethiopia has two types of Tax categories, Direct(which includes the direct tax payment companies and individuals submit to the Government) and Indirect Tax type, which is a singular type of tax that includes Excise Tax under its Categories.

What is an Excise Tax ?

Excise Tax is a type of tax that is imposed on a specific type of goods that are locally manufactured or imported, these types of goods are usually selected either they are listed as luxurious goods, goods that have an elastic demand or hazardous products both health and community wellness related. The range of the tax land in between 5%-500% which has to be paid within a time of clearing the goods from the customs area for the imported products and within 30 days from the date of production for locally produced materials.

 

Ministry of Revenue is amending the Excise Tax

Ministry of Revenue holds Authorization for all tax types, classification,lead, and collection, the ministry made an announcement on prior days on the revision of proclamation and now  its completed it is making some modifications to the Excise tax in reference to

• Make improvements on products subject which are overlapping excise tax
• Authorize Excise tax on telecommunication services
• Revise and remove some products which are currently subjected to this tax type

 

Besides the structural amendment, the tax might Increase or decrease following this modification since the sector is highly affected by outside factors which would lead the Government to decide whether to raise or decrease its rate.

 

Governments might raise or decrease the tax rate mainly for two reasons :-

• The first reason is When the government needs additional cash support to spend on different economic activities
• The second is when the government decides to control the money flow which in this case is the supply and the demand of money.

For example, when the supply of money is too much in the hands of people, it is a common practice to collect it under the pretext of tax.

 

Another bold point which needs to be revised when making changes to the tax values is that, the positive and negative pressure it would create on the market. If the authorized tax rate is decreased, positively can be accustomed to lowering the existing price (unlimited profit ceiling increase demand) and increase the money supply or can lead to a high level of profit earning for the producer and the importers while the customer stays at the expense if governmental supervision is not implicable. On the other hand, increasing a tax might lead to inflation and demand degrading besides its additional income generation to the customer.