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Gov’t waves 78 bln birr in tax as part of economic stimulus package 
Eyob Tekalign (PhD), State Minister of Finance

Gov’t waives 78 bln birr in tax as part of economic stimulus package 

In an effort to stimulate the economy, the government has introduced tax waivers, cost sharing measures and the like, that will benefit 80 percent of businesses affected by the coronavirus pandemic.

In his statement broadcasted on Thursday, Eyob Tekalign (PhD), State Minister of Finance said the stimulation packages are aimed at easing the burden businesses are shouldering. With that, a total of 78 billion birr collectable tax will be the amount waved.

“In that regard, a ten year overdue taxes unpaid until 2015, have been written off. Those taxes audited and should have been paid between 2016 and 2019, are exempted from interest and penalties. The principals will be paid on installment basis once 25 percent of the overdue tax is paid up-front. The remainder is set to be paid over one year. Accordingly, those businesses that can afford to pay the 25 percent principal at once, will have a 10 percent discount,” the state minister said. The decision includes cases pending in court.

The decision of the government includes a 50 percent waiver for income taxes and businesses are recommended to withhold four months of taxes in order to sustain jobs.

For rental taxes, with the target to share the burden of small businesses, Eyob outlined that educational institutions including higher educations, small and medium businesses such as hotels that are highly affected by the pandemic and residential landlords, are entitled to receive preferential treatments. Hence, businesses that have written-off two months of rental fees will be exempted from paying rental income tax for a year conditional on verification. Landlords who collect a monthly rental income below 10,000 birr as well are entitled to be free from paying rental taxes. 

In an effort to let businesses have a relative ease in their cash flow and transactions, the government has introduced a window of collectable Value Added Taxes (VATs) and Turn Over Taxes (ToTs) on a monthly basis to be withheld until June. Though still payable, but is believed to relax, to some degree, financial constraints on businesses. In fact, government figures indicate so much as 50 percent of the tax revenues are usually generated from VATs and ToTs.

Apart from availing a quickly accessible loan for SMEs from Micro Finance Institutions through the Development Bank of Ethiopia (DBE), the government has earmarked 1.5 billion birr for cooperatives.

Further considerations are made for unsettled custom duty arrears. Those firms that sought to settle amounts from the privatizations of State owned Enterprises (SoEs), and those that are penalized for abusing duty free privileges, are to be exempted from paying arrears in interests and penalties.