Prime Minister Abiy Ahmed (PhD) has given the go-ahead for amendments to income tax and the implementation of a minimum wage—groundbreaking decisions for the country, sources revealed.
The decisions were revealed at a meeting at the Office of the Prime Minister (PMO) on August 30, 2023.
In attendance at the meeting were key officials, including Kasahun Folo, president of the Confederation of Ethiopian Trade Unions (CETU), Gedion Timotewos (PhD), Minister of Justice, Muferiat Kamil, Minister of Labor and Skills, and other government representatives.
Following the meeting, Abiy assigned the respective ministries to initiate the implementation process for these measures.
CETU has been advocating for these changes to address the challenges posed by inflation, poverty, and the absence of a minimum wage faced by the population. Despite plans by the Union to organize a public rally on May Day to protest the government’s lack of response, the rally was ultimately prohibited.
“We have been raising these concerns and submitted a letter to the PMO on May Day. The PM informed us that the government’s inability to convene us earlier was due to heavy work pressures,” Kasahun told The Reporter following the meeting at the PMO.
“However, the PM managed to address our issues this week, despite a tight schedule. We received positive responses from the PM on all the matters we raised, and respective institutions have been assigned to take action,” Kasahun added.
The discussion encompassed various aspects of the country’s work environment, including CETU’s requests for a reduction in employment tax, the establishment of a minimum wage, and reestablish the advisory board.
Kasahun expressed gratitude for recognizing longstanding problems, emphasizing that the PM did not dismiss the importance of a minimum wage or deem employment tax reduction impossible.
“The PM gave directions and assignments to the ministers, to finalize the works. Both the PM and the ministers responded positively, acknowledging the challenges faced by workers,” Kasahun said.
He described the discussion as fruitful and a significant milestone for CETU.
Before implementing the measures, the assigned ministries are required to conduct studies and engage in discussions with the Union. However, the Union did not provide a specific request regarding the exact rate of employment tax reduction, as this will be determined after the study.
Regarding minimum wage, the Council of Ministers will introduce a new regulation to establish a Wage Board.
Despite the government’s efforts to implement stringent measures to increase tax collection and bridge budget deficits, Kasahun reassures that the reduction in employment tax will not be affected.
He stated, “The government has already accepted the reduction and assigned ministries. It is a decision that has already been made. The PM has affirmed that the government will not hesitate to support the low-income population.”
The MoJ, Ministry of Labor and Skill, Ambassador Redwan Hussien, advisor to the PM, and officials from the PMO were assigned these tasks by the PM.
CETU’s request to reduce employment tax is motivated by its impact on the declining purchasing power of citizens. The current income tax provisions, revised in 2016, only exempt salaries below 600 birr per month from employment tax.
The existing tax structure ranges from a minimum rate of 10 percent for salaries between 601 birr and 1,650 birr per month, to a maximum rate of 35 percent for salaries exceeding 10,900 birr per month.
If CETU’s request is implemented, the tax rates and salary ranges will undergo restructuring. For instance, salaries up to 1,500 birr per month may be exempted from tax, while the 35 percent rate could apply to salaries starting from 15,000 birr per month. These changes would aim to alleviate the tax burden on lower-income individuals and adjust the tax brackets to better reflect income levels.