Website Preloader
Website Preloader

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

 

 

Major Changes in Ethiopia’s VAT Regime

Major Changes in Ethiopia’s VAT Regime

On June 27, 2016, during its 36th regular meeting, the House of Peoples Representatives ratified Value Added Tax (VAT) Proclamation No.1341/2016, by replacing Proclamation No.285/1994. The Proclamation became effective immediately upon its approval.

The proclamation incorporated substantial updates in the VAT proclamation, it tried to address changes in economic activities, electronic transactions, tax exemptions, and the relationship between input and output tax, and aligned the system with existing global standards. It is made to create clear and effective legal frameworks that contribute to an efficient implementation of VAT within the national legal system.

Love unto Grave (ፍቅር አስከ መቃብር): The Circulated Contract’s Implications

Love unto Grave (ፍቅር አስከ መቃብር): The Circulated Contract’s Implications

The well-known and prominent novel love unto Grave (ፍቅር አስከ መቃብር) was adapted in the film series aired by the state media, EBC, in early October. The film series produced by EBC and directed by the renowned cinematographer and director Sew Mehon (Somic). However, after airing for four consecutive episodes, the federal Supreme Court, up on the application of the author heirs issued an interlocutory injection order suspending the broadcasts. Additionally, the court is now entertaining the case brought by the heirs, summoning the defendants to submit their statement of defense.

Legal updates and Recommendations on the Draft Real Estate Bill in Ethiopia

Legal updates and Recommendations on the Draft Real Estate Bill in Ethiopia

The draft bill on Real Estate Development, Marketing, and Property Valuation has been tabled before the House of Peoples’ Representatives (HPR) for ratification following discussions by the Council of Ministers. This article aims to highlight the contents of the draft proclamation as a legal update and point out areas of concern that should be reconsidered during the ratification process.

Dispute over Taxing Undistributed Profit in the Context of Tax Treaties

The Dream and the Dilemma of Africa’s Single Currency

It is an ambitious plan that sees the African Union (AU) striving to create a single currency for the continent, marking a crucial part of its economic integration strategy. The initiative, crafted within the broader design of the Abuja Treaty of 1991, aspires to pool...