Ministry Propounds Benefits of Excise Tax Bill, Advisor Warns of Transportation Deficit

Ena January 18/2020 The draft revised excise tax law will invigorate the automotive industry in the country in the long run, according to Ministry of Finance.
In an exclusive interview with ENA, Excise Tax Policy Director at the ministry, Mulay Woldu said the draft law will enhance technology transfer and the automotive industry as the levying of up to 500 percent excise tax on second-hand imported cars discourages importation of old cars and lowers taxation on new imported cars.

The expansion of car assembly plants in the country will in return create job opportunities, he added.

Moreover, the draft law will enable the government to scale up revenue through excise tax, which has been o.6 percent of the total revenue.

Excise tax on new imported automobiles and semi-electric cars is reduced from 35 to 30 and 35 to 20 percent, respectively, the director said, adding that tax on electric cars decreased to 10 percent.

“The excise tax on semi-assembled and fully assemble cars built with imported spare parts in Ethiopia is minimal and the tax on them is based on their job creation ability, technology transfer and investment capacity. For example, the excise tax on imported semi-assembled vehicles is 10 percent and 5 percent on fully assembled vehicles at home,” Mulay explained.

According to the director, the new revised draft excise tax law also protects the environment by increasing excise tax on polluters and reducing it for those that protect environment.

Fiscal Policy Advisor at Ministry of Finance, Fentahun Belew argued, however, that the law will create transportation deficit in the country as people with middle income cannot afford to buy second-hand or new cars.

He suggested that the government allows at least second-hand cars with up to 6 years be imported with no excise tax as exception by considering the buying capacity of the middle class.

Otherwise, the price of new cars will not be affordable for most people of the country, he stressed. The draft law may also affect negatively youth who plan to buy car and earn their livelihood through working with it.

The advisor believes that it is fair and expected from a government to levy excise tax on goods and services for expanding infrastructural development, fulfilling social responsibilities and other administrative purposes by properly allocating the money collected.

Ethiopia has not made revision on its excise tax law for the last 17 years, it was learned.