As part of investment incentive, the Ethiopian Ministry of Revenue has provided duty free import privilege of 65 billion birr (around $2.4 billion at the prevailing exchange rate) in the past six months.
This is indicated in the six moth performance report of the Ministry. Most of the tax incentive has been going to investors in the manufacturing sector to import capital goods such as, machines duty free.
Even though Ethiopia’s duty free import incentive to such investors has been growing annually, the export revenue of the country has been declining.
In the past six months the country has collected a total of 98.67 billion birr (around $3.6 billion), achieving 80% of its target for the period.
The plan of the Ministry was to collect 112.18 billion birr ($4 billion). Compared to last year same period, the income of the tax income of country has increased by 7.86 billion birr ($282 million). Reports show that Ethiopia’s tax to GDP ratio is below the sub Saharan average.
For many years Ethiopian government has been filling its budget deficit from external and domestic loans. There was around 35% gap between the budget the country approved last June for the current fiscal year and the tax the country planned to collect by the time.
After visiting the country in December 2018, the International monetary Fund (IMF) directors have advised Ethiopia to implement structural reforms to promote competitive markets and improving the investment climate to catalyze private investment.
“Privatizations, public private partnerships with adequate safeguards, and removal of obstacles to private investment could support renewed growth momentum while attracting foreign resources and know how,” the IMF said.