Ethiopia Implements Revised Excise Tax Rates for Beer, Plastic Bags, and Tobacco

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. #EAA #Excise Tax #Ethiopia #Government Revenues

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.