The price of telecom services might be increased soon if the draft amendment of excise tax proclamation levied tax on the sector, however the government argued that the upcoming opening up of the telecom industry will reduce the price.
The draft proclamation that is the most discussed topic for the last couple of weeks has been tabled to the parliament has included several changes compared with the 2002 proclamation and amended in 2008.
The draft document revised percentiles of most of the commodities and services and also added some new items on the list.
One of the newly added items is the telecom services that include mobile service (voice, data and short message), landline and wireless internet service and telecom services.
In the latest public hearing held on Wednesday January 1, at the parliament representative from Ethio Telecom, the state owned monopoly, opposed the five percent excise levy on the telecom sector.
The representative said that the rate is very huge. “We suggest to be imposed at least in a progressive manner than imposing such kind of levy at a time,” he added.
Observers on the sector said that the new excise levy shall increase the tariff of the telecom service. They said if the government apply a new tax on the sector besides the existing direct and indirect taxes, the service charge will increase significantly.
The draft excise on telecom service does not include the landline voice service.
Eyob Tekalgne, State Minister of Finance, rejects the argument that the price of the telecom service will increase. He looks the case the other way round. He argued that the telecom sector will be opened for competition and that will push the tariff to drop. “The companies will compete on the sector that will eventually reduce the rate,” he told Capital.
Currently the sector is monopolized, while the government announced by March 2020 two more companies will be selected to play on the sector. At the same time the minority share on the Ethio Telecom will be also privatized in the current budget year.
A year ago the telecom provider introduced massive tariff reduction on its services.
Telecom prices to increase if excise tax levied
Dirty hands, happy families
By Ruth Brook
An organization encouraging children to trade in their screens for paintbrushes is hosting an outdoor family play event at Unity Park on January 11th, 2020. “Nu Chika Enabuka” or “Let’s play with mud” is an event created by visual artist Hamere Mulugeta who pioneered this organization, which shares the same name as the event.
As the name suggests, the event encourages children to get their hands dirty and parents to tap into their inner child. The activities carried out include painting, making art out of recycled materials, pottery and sewing as well as culturally motivated activities such as weaving, traditional face painting, cotton spinning, weaving and traditional bread making.
“I love Ethiopia and Ethiopian culture. When I think about what I love about being Ethiopian, it’s these cultural activities. Playing tiba tibe, making mulmul. I want my children to experience the same things I experienced in my childhood and play the same games I played. I want them to be able to say they love their country,” Hamere passionately expressed.
The six year old organization initially began with a bi-annual calendar of events at different schools across Addis Ababa, one during Christmas break and a five-week camp during the summer. In the last year, “Nu Chika Enabuka” has branched out into independent day-long events, once every two months.
Contesting the idea that play dates are exclusive to children, Hamere created this organization with both parents and children in mind. The intention is for parents and children to play together; bonding over activities like face painting and pottery, bringing a sense of nostalgia for a bygone time in the parents’ lives, she explained.
While the immense benefits of technology are not lost on Hamere, the artist equally recognizes the current screen takeover in society, especially among children. The organization seeks to create a balance in children’s lives, where for a few hours they are immersed in nature and harnessing their creativity.
The future looks bright for the organization, as the opening of an official ‘Nu Chika Enabuka’ centre is in the pipelines with the Ministry of Culture and Tourism. The centre will be an extension of the event, carrying out the same outdoor activities with the addition of a café and restaurant serving nutritious meals, Hamere said. Falling in line with the workings of the event, parents and children are encouraged to attend together.
The upcoming event will take place from 9.00 am – 4.00 pm on Saturday January 11th 2020 at The Grand Palace in Unity Park. Attendees will be required to pay the entrance fees associated with Unity Park and an additional fee to “Nu Chika Enabuka” for select activities such as face painting, painting and bread making.
Stake holders held heated discussion on new excise tax
The government and stakeholder boldly reflected their own interest mentioning number of jobs created, safeguarding the health of the community and boosting the revenue from tax in the mid-week at the parliament public hearing session on the draft bill of excise tax that is referred to parliament Revenue, Budget and Financing Standing Committee on December 17, 2019 for further discussion.
Revision of the excise tax proclamation has become necessary to collect and impose tax on goods and services that are believed to be luxury, hazardous to health, causing social problems as well as on basic goods which are demand inelastic, the draft states.
According to the Ministry of Revenue, Ethiopia collects below 0.7 percent of excise tax to GDP ratio, which is well below the 1.4 percent in Sub-Saharan countries. The government is working on modernizing the tax collection system and revising the excise tax law would increase tax revenue and help achieve economic and social goals.
Officials believe second-hand cars as one of the major reasons for increasing road accidents in the country. The bill tabled proposes an introduction of 500 percent excise tax on vehicles that are used for over seven years.
Though officials echoed used cars result in environmental issues connected to climate change, scholars argues the 500 percent tax on used cars and climate change doesn’t have correlation in existing situation.
“The government better use other mechanism like banning used cars rather than levying 500 percent tax,” said Tadesse Lencho who attended the hearing.
“The objective of the bill is not only to discourage secondhand cars import through tax increase but is to also help to attract multinational companies like Volkswagen and others that showed an interest to open an assembly here in the country” said Eyob Tekalegne, State Ministry of Finance.
According to the data from the Ministry of Finance, over 35,000 vehicles have been imported last year into the country and the majority of them were secondhand.
Apart from cars, beer exclusively produced from imported barley and malt will be subjected to a 35 percent excise tax while a beer that uses local raw material of which excluding water is at least 75 percent by weight of its constituents will be subjected to 30 percent excise tax.
“We obliged to reconsidering our future investment including the one in pipeline” representatives of beverage and alcohol companies echoed in unison.
“The current collection system is far more complex to administer and liable to undervaluation particularly with beer companies,” said Mulay Weldu, Tax Policy Director of the Ministry of Finance.
The National Tobacco Enterprise, the monopoly cigarette producer and importer is the only company with no complaints on the proposed tax, rather asks the government to fight contraband.
Tobacco and tobacco products will be subjected up to 30 percent excise tax.
It also proposes a 40 percent excise tax for all types of wines including fortified wines, fermented wines and other types of alcoholic beverages obtained by fermentation of fruits. Drinks with 40 percent alcoholic content could be subjected to an 80 percent excise tax.
Representative from the health association argues that the proposed excise tax on tobacco and beer is less when compared to neighboring Kenya.
“No need to compromise the issue of health, where 52 percent of the people are dying in non-communicable disease because of alcohol, cigarettes and junk food,” said Wendu Bekele from Ethiopian Cancer Association adding that the government allotted 6.7 percent of the total revenue for the health sector which is the lowest in sub Saharan African countries.
A new bill has been introduced by the Ministry of Finance to amend the nation’s excise tax law in an effort to standardize taxation. Commodities liable to the proposed law includes fats and oil up to 50 percent, sugar and sugar confectionery up to 30, soft drink powders 25, non-alcoholic beverages 20 percent, salt 25 percent, mineral fuel and oil and their product 30 percent, rubber tire 5 percent, perfumes and cosmetics 100 percent, plastic shopping bags (40 birr/kg), human hairs and wigs 40 percent, carpets 8, TV and Camera 10 percent and more.
IFC invests € 50 million in Habesha for local sourcing
By Ruth Brook
The International Finance Corporation (IFC) announced an investment of up to € 50 million in Habesha Breweries S.C. in a press release earlier this week. The sizeable loan from IFC – a member of the World Bank Group – is intended to help the expansion of Habesha Breweries operations, create 500 jobs and increase local barley sourcing from smallholder farms.
The loan is co-funded by the Dutch Development Bank (FMO), Dutch Banks Cooperatieve Rabobank U.A. (Rabobank) and ING Bank N.V. (ING).
“Our partnership with IFC and other lenders is timely and key to growing the malt barley supply chain in Ethiopia. We aim to increase smallholder farmers from 1,000 to 14,000 in the next five years and improve household incomes.” said Zewdu Negate, CEO, Habesha Breweries, in Monday’s press release.
With the Ethiopian brewing industry growing rapidly, it serves as a key contributor to economic expansion. That said, up to 90 percent of malt barley is imported, according to IFC. This project aims to grow the local malt barley supply chain and increase farmer productivity with improved access to agricultural necessities such as seeds and fertilizers. It is predicted to create a hike in income for 15,000 smallholder barley farmers.
“Programs that support local sourcing are critical to linking smallholder farmers to large supply chains, thus creating more economic opportunity and jobs for vital parts of the country’s agriculture sector,” said Jumoke Jagun-Dokunmu, IFC Regional Director for Eastern Africa, in the press release.
In October of this year, IFC formed a similar partnership with Soufflet Malt Ethiopia – under the French company Groupe Soufflet – investing €20 million in the company with the parallel mission of boosting local malt production and supporting farmers.
IFC is no stranger to titanic investments. For nearly six decades, the corporation has been investing $25 billion in African businesses and financial institutions. Neighboring countries Kenya and Tanzania have recently partnered with IFC for loans in their education and health sectors respectively.
In the last five years alone IFC put down $317 million in new investment commitments and $50 million in several areas of interest including agribusiness and manufacturing. Ethiopia is a key market for the corporation.
“This investment has a purpose and feels like the right thing. I am extremely proud that we are able to continue to build and grow the brewery in partnership with the barley farmers and residents.” said Negate.
