Ethiopia Plans to Raise VAT
People of Ethiopia are talking about the tax changes. Recent news from Ethiopia says there might be a plan to raise the Value Added Tax (VAT) from 15% to 17.5%. This change aims to help the government get more money during tough economic times. But what does it mean for everyday people, businesses, and the country?
VAT in Ethiopia is a tax added to the price of many items and services, like things you buy or import. Right now, it’s 15%. The new idea is to make it 17.5%. An increase in VAT would help Ethiopia collect more money as now there is less tax revenue than its total economy.
Economic reports show that the tax-to-GDP ratio of Ethiopia has dropped a lot over the years. Reasons include economic changes, people not paying taxes fully, and less help from other countries.
The Ethiopian government says that this matches what other African countries do, where VAT is often 15% to 20%. It’s not a direct tax on assets like property sales, but it could make buying or selling things more expensive if taxes apply. However, the plan isn’t final yet. It needs approval from lawmakers.
Other Tax Changes in Ethiopia
Ethiopia is updating its rules to collect more money. Last year, new laws made VAT cover more areas, like online services and imports. In June 2025, there was talk of adding 15% VAT and other taxes on fuel, plus a fee for using vehicles. Income taxes might change too, with higher earners starting at 14,000 birr for the top rate.
Ethiopia is like other growing countries that need more cash. Nearby places like Kenya have VAT around 16%, and experts say Ethiopia is getting better at collecting taxes, like letting buyers hold back only half the tax in some cases.
How the VAT Increase Could Affect Ethiopians
After increasing VAT, Ethiopian government could get more money and use it for schools, roads, and paying debts. It might make the economy stronger and attract outside investors. But on the downside, prices for daily items could increase, making life harder for families with less money. It might also push more people to buy things without paying taxes, in hidden ways.
On social media, Ethiopians are worried about this increase in VAT. People say it could increase living costs, like in other places where taxes have increased and prices have jumped. Business owners want more straightforward rules to follow for taxes and less paperwork. Without raises in pay or exceptional help, it could make the rich-poor gaps bigger.
VAT stands for Value Added Tax. It’s a fee added to the price of goods and services at each step of making or selling them. In Ethiopia, it’s currently 15% on many items, like imports and some services.
Ethiopia needs more money to fix its budget problems. The country’s tax collection is low compared to its economy, and this hike could help pay for things like roads, schools, and debts without creating brand-new taxes.
Businesses will collect and pay the higher VAT on sales, but they can often get credits for taxes they paid on supplies. It might mean more paperwork, and small shops could face higher costs.
Final Words
Raising VAT to 17.5% shows Ethiopia’s need for more money. They might use apps or online tools to track taxes better and skip taxing basics like food to work well. For you, it’s smart to check updates from the government’s tax office or ask a tax helper.
Moreover, Ethiopian Customs Commission has announced a ban on Sinotruk vehicle imports. This restriction is imposed from May 27, 2017, E.C. Ethiopia prohibits the entry of these popular Chinese-made trucks