Performance of the Ethiopian Sales and Excise Taxes
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Date
1999-05
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A.A.U
Abstract
Over the past three decades governments in Ethiopia increasingly relied all indirect taxes to meet their fiscal
needs. Tax yields from such sources have been on the rise and seem to be insulated from the economic spiral
which characterized the national economy during the years. Sales and Excise taxes have gone through
profound transformations in terms of adjustments in statutory rates, coverage, and administrative efficiency_
Revenue adequacy is a major yardstick by which tax systems in developing countries are gauged and this study
has put to test the track record of the Ethiopian sales and excise taxes in this respect. Also on the notion that
formal incidence and effective incidence rarely overlap for commodity taxes the redistributive implications of
the taxes have been analyzed.
using the proportional adjustment method to abstract from discretionary revenue effects and with the help of a
historical time series tax data regression results strongly indicate that sales and excise taxes have been buoyant
and elastic. Still, the not-so-strong revenue effects of changes in tax handles, which came against the
background of their frequent application, need to be a concern of tax policy makers. On a different note, the
study. finds that the redistributive implications of the taxes are far from pro-poor. Nevertheless, any reform of
the taxes on equity platform should take in to account the positive roles of the tax provision that exempts food
f rom these taxes and the structure of the excise taxes.
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Keywords
Ethiopian, Excise, Sales