In his address during the 42nd regular session of the FDRE House of Peoples' Representatives, Prime Minister Abiy Ahmed (PhD) announced that Ethiopia successfully generated 900 billion birr in revenue for the current fiscal year. This figure, however, stands in stark contrast to the country’s total expenditure, which reached 1.2 trillion birr, resulting in a fiscal shortfall of approximately 300 billion birr, he stated.
The Prime Minister elaborated on this discrepancy, emphasising the low revenue generation relative to the nation’s Gross Domestic Product (GDP). He highlighted that a startling 46,000 registered taxpayers in Ethiopia are failing to meet their tax obligations. He classified the non-compliance into several categories: some taxpayers report losses, others claim to balance income and expenditures, others assert they have no profits, while a significant number simply do not submit any reports at all.
Current statistics indicate that a mere 37% of licensed businesses in the country contribute to the national tax revenue. PM Abiy articulated that the tax revenue collected from these contributors only accounts for 60% of the desired amount, with the remainder sourced from various other revenue streams.
He posited that should the taxpayer compliance rate increase from the current 37% to 50%, the potential for enhanced tax revenue collection could be realised.
Addressing the challenges of tax administration, Prime Minister Dr Abiy acknowledged ongoing reforms aimed at improving the structure and efficacy of the tax system.
He underscored the urgency of combating tax evasion, which he identified as a significant barrier to economic stability and growth.
The Prime Minister also emphasised the importance of addressing issues related to informal receipts, which hinder accurate revenue reporting and tax compliance.
Furthermore, he reported that initiatives to digitise the tax collection process are showing promising results. This modern approach is designed not just to streamline tax processes but also to enhance transparency and accountability among taxpayers.
Abiy made it clear that without a culture of honest tax contributions, essential public services, such as infrastructure development, water supply, and education; would be at risk, jeopardising the nation’s overall progress and viability.
In his closing remarks, he called upon the business community to embrace a conscientious approach to tax payments. The Prime Minister stressed that the health of the nation’s economy depends heavily on the integrity and commitment of its taxpayers. Through these measures, he aims to not only bolster state revenue but also to foster a sense of civic responsibility among Ethiopian business leaders.