- In 2017, Ethiopia revised its VAT Proclamation as part of the National Medium-Term Revenue Strategy.
- The country’s tax revenue had fallen below 7% of GDP, far from the 15% recommended for financing SDGs.
- VAT is considered a good tax as it is levied on consumption, not capital or production.
- Ethiopia’s VAT rate is 15%, lower than the regional average of 17.5%.
- The main issue was not the VAT rate but weak tax administration and compliance.
- The government decided to keep the VAT rate at 15% and focus on improving tax collection methods.
- To address VAT’s regressive nature, basic goods and services were exempted to protect low-income households.
- The reform aimed to modernize tax administration, adapt tax laws, and reset Ethiopia’s revenue path.
Source: stockmarket.et
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
