Last year, in
an interview with the Voice of America's Amharic Service, Ethiopia Commodity
Exchange CEO Eleni Gabre-Madhin told the radio that farmers in Ethiopia do not
pay any taxes.
"As far
as I know, farmers in Ethiopia do not pay taxes " said she.
That is not
true. According to applicable tax laws, individual farmers and agricultural
producer cooperatives with a gross annual earning of as little as Birr 600 (USD35)
are required to pay agricultural income tax. Additionally, farmers pay a fixed
annual land use tax and variable sales taxes which are indirectly passed on to
them by businesses.
Below is excerpts
from a study titled "Taxation in Ethiopia" published in January 2005 by
Ethiopian
Chamber of Commerce (ECC) and Ethiopian Business Development Services Network
(EBDSN) on behalf of German Technical Cooperation (GTZ) and Partnership Project
Rhein-Main Chamber, Germany and ECC (with SEQUA).
---
Agricultural Income
Tax
According to Proclamation No. 152 of
1978 individual farmers and agricultural producer-cooperatives earning up to
Birr 600 per annum are required to pay 10 Birr. The tax rates on every
additional income vary from 10% to 89% for income above 600 Birr.
In line with the economic policy and
structural set up of the Federal Democratic Republic of Ethiopia, the former
tax on income from agricultural activities and the land use rent was revised in
1995. Since income tax from this source is allocated to Regional States in
consonance with the provisions of the new constitution of 1994, each Regional
State is entitled to issue a Proclamation providing for such a tax and rent.
Accordingly, the Oromia Regional State
has promulgated Proclamation No. 8/1995 that revised agricultural income tax
rates schedule and rural land use fee. As for the payment of income tax from
agricultural activities other taxpayers, except state farms, shall pay at the
following rate.
Agricultural Income Tax per
Proclamation No. 8/1995, Oromiya
No.
Annual Taxable Income Tax Rate
1
up to 1,200 Birr
15
2
1,201 - 5,000 5%
3
5,001 - 15,000 10%
4
15,001 - 30,000 20%
5
30,001 - 50,000 30%
6 over 50,000 40%
A state farm shall pay 40% of the
taxable income it realizes from its agricultural activities. Income from
agricultural activities is said to be determined by estimating the price, in
the area, of the crop before harvest.
If the crop is sold, the price
declared shall be the basis for the assessment of income.
1.1.12 Land Use Tax
According to Proclamation No. 77/1976
and No. 152 /1978 individual farmers, who are not members of producer’s
cooperatives, are required to pay a land use fee of Birr 10 per hectare per
annum. Whereas government agricultural organizations are paying 2 Birr per
hectare per annum.
Presently regional states have their
own land use rent systems. For instance, according to the Proclamation No.
8/1995 of Oromiya, rural land held for agricultural activities is subject to
land use rent payment on annual basis. The annual land use rent payable by a
farmer shall be Birr 10 for the first hectare and Birr 7.50 for each extra
hectare of land. Meanwhile statefarming enterprises shall pay Birr 15 for each
hectare of their land holdings.
Land use rent is to be collected
between the 1st
of Hidar
and the 30th
of Miazia
of the year.