As people, society and a country, economical development is a necessity and for that, all citizens must pay taxes. The government then puts the collected money towards the benefit and development of its people. Aside from our basic needs, this is important to fulfill our personal goals and achievements.
A difficult decision has been made by the finance minister on over 19 items. Excise tax is tax imposed on items that the government does not consider basic necessity products even though there is a high demand for those products. One of the products is automobiles; the excise tax imposed on imported automobiles starts at 130% and reaches up to 200%. There are two justifications for these excise taxes.
One is to increase the tax and income for the government and the second one the government’s action to control the market flow of items that it considers are harmful to health, society and economy under its jurisdiction. The basic point is to influence products that are luxurious and are harmful. The ministry of revenues has posted on its social media pages what it defines as luxury items. According to that, luxury items are items that are beyond a person’s basic necessity; for example expensive food items, beverages, cigarettes, perfumes etcetera. So excise tax is imposed on these items to add their value on the market and decrease the number of users.
The finance minister has imposed 130-200 percent excise tax on cars that are above 10 years old. Cars that have served for more than 10 years and have 1300 CC have been imposed with 130% tax, those with 1300-1500 CC with 160% tax and those with above 1500 CC with 200% tax. These would make the price of imported cars to increase dramatically. The reason for this new imposed tax is the amounts of carbon dioxide old cars emit to the atmosphere and the high cost spent on these for gas and spare parts. Automobiles that are younger than 10 years will also be imposed with a tax of 70%.
According to reports, in Ethiopia 2 motor vehicles serve 1000 people and from the 1,500,000 vehicles 90,000 are for public transport and 60,000 are for trade purposes. It is estimated that 180,000 vehicles enter the country yearly and only 20,000 of those are new. 65% of imported vehicles are of Toyota brand. Even though there are car companies their place in the market place is only 15%. Comparing to our neighbor Kenya, the number of registered cars in 2015 is 11,125,536 and 80% of them are used cars. These excise tax could be a good thing for car companies in the country since only 30% of tax would be imposed on cars that have been in the country.
Recent laws have forbidden TV advertisements of beer and alcoholic beverages. Even though it is unknown how many have stopped drinking because of that but it is undeniable that it has decreased the vulnerability through these advertisements. The new excise tax law has imposed a new tax on the profitable beverage industry. Therefore, the new excise tax imposed on beer is 40% per bottle or 11 birr per liter. It is also the responsibility of beer producers to put a stamp on every bottle to signify that they are paying excise tax.
The Ethiopian parliament has recently forbidden the smoking of cigarettes in public places. Cigarette is one of the products that have been imposed with this new excise tax. 30% of tax is imposed on a packet that contains 20 cigars with an additional 5 birr. The excise tax on cigarettes has been criticized to be lower than other countries.
Human hair has been more accepted by society only recently as it increases beauty saves time and is quite inexpensive. In Addis Ababa, Italian and Brazilian human hairs are in demand and their price according to their length ranges from 3000-5000 birr. This product has been imposed with 100% excise tax.
The ministry of revenues has been ordered to collect 19 billion birr in revenues from imported items and products and 5 billion of it expected to be collected from imported vehicles. 4.2 billion birr is expected to be collected from beer and 1.1 billion from cigarette taxes.