Ethiopia Implements Revised Excise Tax Rates for Beer, Plastic Bags, and Tobacco
By Ketema Adane
Excise Taxes: A Dual Role
Excise taxes serve a twofold purpose: generating revenue for the government and influencing consumer behavior. They provide a reliable source of income by taxing goods with consistent demand. Additionally, they discourage consumption of harmful products like tobacco and alcohol through price increases.
The Ethiopian Excise Tax Framework
The Ethiopian Excise Tax Proclamation (No. 1186/2020) levies a tax on specific goods and services. These include:
- Domestically manufactured goods by licensed producers
- Imported goods
- Services provided within Ethiopia by licensed businesses
The tax rate for these items is determined by a schedule within the proclamation and can be adjusted over time.
Recent Tax Rate Updates
An amendment to the proclamation on September 15, 2023, introduced revised excise tax rates for beer, tobacco, and shopping plastic bags, along with changes for cars and other products.
Following this, in June 2024, the Ministry of Finance exercised its authority under the proclamation to adjust the excise tax rates for tobacco and beer. These adjustments became effective upon registration with the Ministry of Justice and publication on the Ministry of Finance’s official website.
The Ministry of Planning and Development data on inflation served as the basis for these adjustments, highlighting the country’s current economic climate.
Impact of the Revised Rates
The new directive applies a higher excise tax to domestically produced beer made from malt. The new rate is 40% or 28 Birr per liter whichever is higher, compared to the previous rate of 40% or 11 Birr per liter .
Similarly, the excise tax on shopping plastic bags has increased from 40 Birr per kilogram to 103 Birr per kilogram.
For tobacco products, the revised rates are as follows:
- Cigars, cheroots, and cigarillos: 30% + 644 Birr per kilogram (previously 30% + 250 Birr per kilogram)
- Cigarettes: 30% + 20 Birr per pack (20 sticks) (previously 30% + 8 Birr per pack)
These adjustments are expected to increase government revenue, but may also lead to price increases for consumers.
Comparative Table of Excise Tax Rates (Prior and Current)
|
Description |
The new excise tax rate |
Old excise tax rate |
|
Beer made from malt |
40% or 28 birr per litter whichever is higher |
40% or 11 birr per litter whichever is higher |
|
Beer produced exclusively from barley grown and malted in ethiopia |
35 % or 23 birr per litter whichever is higher |
35% or 9 birr per litter whichever is higher |
|
Beer the local raw material content of which excluding water is at least 75% by weight of is constituents |
30% or21 birr per litter whichever is higher |
30% or 8 birr per litter whichever is higher |
|
Fermented Beverages and with mixtures of fermented beverages with non-alcoholic beverages and of other beer kind, powdered beer, of an alcoholic content not more than 7% by volume |
40% or 28 birr per litter whichever is higher |
40% or 11 birr per litter whichever is higher |
|
Shopping plastic bags |
103 birr per Kg |
40 birr per Kg |
|
Cigars, cheroots and cigarillos, containing tobaccos |
30% + (plus) 644 birr per Kg |
30% + (plus) 250 birr per Kg |
|
Cigarettes containing tobacco |
30% + 20 birr per pack (20 sticks) |
30% + 8 birr per pack (20 sticks) |
|
Cigaras, cheroots and cigarillos, cigarettes of tobacco substitutes |
30 + 20 birr per pack (20 sticks) |
30% + 8 birr per pack (20 sticks) |
|
Smoking tobacco, whether or not containing tobacco substitutes in any proportion other than tobacco intended for smoking in a water pipe and which consists of a mixture of tobacco and glycerol, whether or not containing aromatic oils and extracts, molasses or sugar, and whether or not flavored with fruit. |
30% + 664 bir per Kg |
30% + (plus) 250 birr per Kg |
|
Homogenised or reconstituted tobacco |
30% + 664 bir per Kg |
30% + (plus) 250 birr per Kg |
|
Snuff, tobacco extracts and essences |
30% + 664 bir per Kg |
30% + (plus) 250 birr per Kg |
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