Defferentiate Ethiopian taxation system by giving examples of each .

Answer 1

The Ethiopian taxation system includes various types of taxes imposed on different activities and entities. Here are some examples:

1. Income Tax: The income tax in Ethiopia is levied on the taxable income individuals and businesses earn. It is progressive, with different tax rates for different income brackets. For instance, individuals earning up to 400,000 Ethiopian Birr per year are subject to a 10% tax rate, while those earning above 2,400,000 Birr face a 35% tax rate.

2. Value Added Tax (VAT): Ethiopia operates a VAT system, whereby goods and services are subject to a 15% tax rate at each stage of the production and distribution process. For example, when a manufacturer sells goods to a wholesaler, a 15% VAT is added to the sale price. The wholesaler, in turn, adds another 15% VAT when selling to a retailer or consumer.

3. Customs Duty: Customs duties are imposed on goods imported into Ethiopia from abroad. The rates vary depending on the type of goods. For example, the customs duty on motor vehicles can be as high as 35%, while certain inputs for manufacturing industries may have lower or zero duty rates.

4. Excise Tax: Excise taxes are applied to specific goods, such as alcohol, tobacco, and petroleum products, to deter their consumption or control their quality. For instance, Ethiopia imposes excise taxes on alcoholic beverages based on their alcohol content or production capacity. The tax rates range from 55% to 100% for different types of alcoholic products.

5. Payroll Tax: Employers in Ethiopia are required to deduct and remit payroll taxes from their employees' salaries. These taxes contribute to the social security fund and other benefits, such as pension and healthcare. The specific rates depend on the employee's earnings and range from 7% to 11%.

6. Property Tax: Property tax is imposed on the owners of real estate properties, including land, buildings, and apartments. The rate varies depending on the location and type of property. For example, urban land and buildings in Addis Ababa are taxed at a rate of 2.5% of the market value.

These are just a few examples of the different types of taxes in the Ethiopian taxation system. The country also employs other forms of taxes, such as turnover tax, withholding tax, and profit tax for specific industries and activities.