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Overseas Development Institue Institue for Fiscal Studies

The Ethiopian Ministry of Finance (MoF) has published its second tax expenditure report covering customs duty and import taxes for the fiscal year 2018/19 to 2020/21. The report was produced by TaxDev in collaboration with the MoF’s Tax Policy Directorate (TPD). To estimate import tax expenditures, the report uses administrative customs and import tax data from the Ethiopian Customs Commission and applies the standard revenue foregone method. 

The report finds that import tax expenditures were ETB 121 billion in FY 2020/21, equivalent to 2.8% of GDP. Of this, import VAT expenditure constituted around 37.0% of total import tax expenditure (or ETB 45 billion), while customs duty expenditure made up 32% (or ETB 39 billion). Excise on imports and surtax together represented around 31% (ETB 37 billion).  

Import tax expenditure grew by 54% in nominal terms in FY 2020/21 relative to FY 2019/20. Vehicles alone accounted for 19% of the total import tax expenditure in FY 2020/21, followed by animal and vegetable oils with 18% and non-electrical machinery imports with 13.5%. Tax expenditures on vehicles were mainly driven by an increase in statutory tax rates, whereas tax expenditures on animal and vegetable oils reflected new exemptions on basic food items including cooking oil.

The TaxDev team supported a number of changes to methodology designed to better identify the contribution of different tax types to overall tax expenditures (given the design of import taxes mean that tax rates and tax expenditures on different tax types interact). We have also focused on building capabilities within the Ethiopian TPD so that it can undertake tax expenditure reporting on an annual basis, and develop and improve its reporting over time.

The full report can be accessed at 

Published on: 29th March 2023

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