Ethiopia’s Parliament has decided to disregard a proposal to lift excise duties on imported saturated fat, reinstating the item’s 30 percent excise rate. The amended excise tax proclamation was approved by the House of People’s Representatives (HPR) on April 27, 2023.
The amendment was enacted only three years after the existing excise tax proclamation was approved in 2020. Previously, imports of saturated fat containing more than 40 grams per 100 grams were subject to excise taxes ranging from 30 percent to 50 percent. Typically, saturated edible oil contains animal or vegetable fat.
When the draft for the new amendment was presented to the HPR at the end of January 2023, it proposed lifting tariffs on imports of saturated fats. The Ministry of Finance drafted the proposal, but the Ministry of Health (MoH) requested the imposition of an excise tax on imports of saturated fat oils.
“We proposed to lift the rate because it has become impossible to implement the previous legislation. There is no institution or facility to check how much saturated fat is in imported items. There is no such technology in Ethiopia,” Eyob Tekalign (PhD), state minister of finance, told the Parliament. “We could not know the rate and impose the tax without knowing the exact content of the imported saturated fat.”
He claims the failure to implement the excise tax proclamation was due to a lack of technology. “We determined that it was preferable to eliminate the tax and allow imports of saturated fat without the excise tax.”
According to Desalegn Wedaje, chairman of the Budget and Finance Affairs Standing Committee in Parliament, Eyob has had to explain the situation four times in the past few months.
However, the Parliament approved the proclamation on Thursday with a 30 percent excise tax rate.
The Ethiopian Food and Drug Administration (EFDA), which is tasked with calculating the amount of saturated fat in imported edible oils, is unable to do so due to a lack of technology and expertise.
For Desalegn, he has no appetite for MoF’s justification.
“We cannot exempt saturated fat from excise tax just because there is no local capacity to measure the content of saturated fat in imported oils. It is better to impose the tax and develop the capacity in the meantime,” Desalegn said.
The primary objective of the new excise tax, according to him, is to discourage the consumption of toxic substances such as alcohol, cigars, and old vehicles. It also aims to promote import substitution, green mobility, and the affordability of new cars.
Desalegn claims Ethiopia forfeited 94.5 billion birr in duty-free exemptions in the past year alone. Even though Ethiopia intended to raise the ratio of taxes to GDP to 15 percent by the end of the Millennium Development Goal (MDG), the ratio remains below 10 percent more than seven years after the MDG ended.
“Budget needs are surging substantially. We must increase tax revenue. The revenue share is very minimal,” Desalegn said.