February 17, 2020
The Ministry of Revenue (MoR) announcement that the ratified excise tax proclamation no. 1186/2020 has become effective the day after the ratification of the proclamation by the parliament, was dismissed by businesses who argued that it is against the country’s law.
The revenue collection body announced on February 13, the same day of the ratification of the proclamation by parliament; the new law will be in place as of February 14.
MoR in its announcement published on its social media page stated that the tax calculation will become effective immediately, however the business community expressed their confusion about the announcement.
They said that according to the country’s law, the implementation of the proclamation should wait the publication on Negarit Gazette.
They said that the proclamation stated that the calculation will be applied when products come out from the factory but sometimes products will come out from the factory and stored at different warehouses in the country.
“For instance a company that has a water bottling factory about 200km from Addis Ababa will have a warehouse at the capital, which is the major market area, and it should have transport the product here,” AshenafiMerid, General Manager of Ethiopian Bottled Water and Soft Drinks Manufacturing Industries Association, explained, “transporting the product from the production centre to the warehouse does not mean sales.” “But MoR considered that as a sales and look for their tax,” he added
He told Capital members of his association shall face challenges regarding this.
The final document of the proclamation has given more room for used small cars that were in service for less than four years.
The document of the excise tax proclamation no. 1186/2020 indicated that a used car for not above two years with less than 1300 CC will have the excise tax of 55 percent. On the draft proclamation it was 80 percent. At the same time the final version of the proclamation reduced the tax for up to less than four years used car of the same cc to 105 percent from 130 percent that was tabled on the draft document.
LemlemHadgu, Chairwoman for Revenue, Budget and Finance Standing Committee at the parliament, explained that the percentage has reduced on the aim to reduce the impact on middle class of the society.
Lemlem said that such kinds of cars are accessible for the middle class and the former percentage that was tabled on the draft documents shall affect them, “due to that the percentage was revised to address the middle class of the society.”
The proclamation is also dropped the percentage of the brand new and locally assembled less than 1300 cc cars to 5 percent from 30 percent of the original rate.
The excise tax for cigarette has been proposed to be 30 percent and five birr per packet that has now climbed to eight birr per pack.
New excise tax rates reduced minimum taxes from 10 percent to five while the highest tax will be a whopping 500 percent.
The last time excise taxes were set it was 2002 and the minimum rate was 10 percent.