Ethiopia requires taking rigorous tax measures to encourage tax payers and investors, Ministry of Revenue (MoR) said.

In an exclusive interview with The Ethiopian Herald, MoR Tax and Custom Training Center Head, Tesfaye Mergia expressed that the country should further improve its tax system in a way convenient to the payer and investors, who would benefit from infrastructures built with tax revenues.

He cautioned that if the tax rate, payment system and services are not convenient for the taxpayer, it can have a negative impact on the economy by discouraging investment.

"Therefore, when the tax system is designed, it should be implemented and create a comfortable environment for the taxpayer," he suggested.

While Tesfaye acknowledged that Ethiopia's tax policies are not perfect, he stated that there have been improvements. The Income Tax Act, Excise Tax Act has amended and Value Added Tax Act amendment is on the way, he noted.

He also said that the country's investment law provides tax exemptions to both domestic and foreign investors in sectors deemed crucial for changing Ethiopia's economy.

Addressing the reduction in the country's tax-to-GDP ratio over the past five years, he explained that the agriculture sector, which has a large share of Ethiopia's GDP, has not contributed significantly to tax revenue.

He also cited capacity limitations within the tax administration as a contributing factor.

Therefore, Tesfaye said, the effective utilization of tax revenue is vital for expanding infrastructure, which in turn enables investment to flourish.

He noted that the tax system can be employed as a tool to encourage specific economic sectors that the government believes will contribute to the country's development. This can be achieved through the provision of tax incentives to stimulate investment.

BY EYUEL KIFLU

THE ETHIOPIAN HERALD SUNDAY EDITION 16 JUNE 2024