Ethiopia lacks modern property tax law framework

The implementation of the Proclamation on the Taxation of Urban Houses in Ethiopia has revealed a significant gap in the country’s tax legislation. Despite the importance of property taxes for local development, Ethiopia still lacks a contemporary property tax law framework, resulting in complicated and tedious grievances for taxpayers.

Aschalew Ashagre (PhD), an assistant professor at Addis Ababa University School of Law specializing in property, agriculture, and private sector development, highlighted that a draft property tax law was prepared last year but has since stalled. The absence of property tax provisions in the Ethiopian Constitution further complicates the issue.

The outdated Decree No. 80/1968, enacted in 1971 E.C., governs the taxation of townhouses. This decree covers tax determination, repayment periods, tax rates, and exemptions. However, its five-decade-old framework is not suited to current times and challenges.

“There is a long way to go before the Ethiopian property tax system can be considered modern and effective,” Aschalew stated. He emphasized that there is no legal or institutional framework in place to protect taxpayers’ rights adequately. The process for addressing taxpayer grievances is lengthy, complex, and burdensome, indicating the need for substantial reforms.

These insights were shared during a panel discussion titled “Impact of the Implementation of the Tax System on the Private Sector,” organized by the Addis Chamber in Addis Ababa. The forum underscored the necessity of reviewing Ethiopia’s current tax policy and legislation to ensure they are efficient and conducive to business practices.

Aschalew called for updating the country’s laws and institutions to create a fair, transparent, and accountable tax system that respects taxpayers’ rights and provides fundamental access to justice. He highlighted that Ethiopia’s tax revenue as a percentage of GDP is low compared to sub-Saharan Africa. Domestic income collected through taxes plays a crucial role in the national economy, making it essential to establish a stable and healthy tax system to build a strong and sustainable economy and maintain a stable macroeconomic environment.

The panel discussion concluded with a call for comprehensive tax reforms to align Ethiopia’s tax system with modern standards, protect taxpayer rights, and support the country’s economic growth and development goals.

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