Ethiopia Exceeds ETB Trillion in Tax Revenue

Ethiopia’s federal government and regional states have collectively shattered tax revenue records, exceeding ETB 1 trillion in the fiscal year leading up to May 2025, according to a landmark announcement by the Ministry of Revenue. This milestone signals a significant economic shift and reflects the government’s aggressive efforts to modernize its tax system and broaden its revenue base.

Revenue Minister Aynalem Nigusse presented the impressive figures to the House of People’s Representatives on May 6th, highlighting that the federal government alone contributed ETB 720 billion to the total. While this achievement represents a robust ETB 279 billion surge (74.56%) compared to the same period in 2024, the Minister emphasized that this is merely a stepping stone towards meeting Ethiopia’s ambitious development goals.

“According to my current report, in April, ours and the regions’ combined revenue will exceed one trillion [birr]. The federal government has reached 720 [billion birr] today,” Minister Aynalem declared, underscoring the momentum behind the revenue surge.

The Ministry of Revenue itself exceeded its nine-month target, collecting ETB 653.2 billion against a planned ETB 646.7 billion – a testament to the efficiency of its collection efforts. This success is attributed to key policy changes, including revisions to the excise tax, amendments to the Value Added Tax (VAT) and Export Incentive Scheme (ETI) proclamations, and a concerted push to expand the tax base. Specifically, the July 2024 shift in the foreign exchange transaction system has significantly boosted VAT collection.

The revenue breakdown reveals a balanced contribution, with ETB 345.93 billion stemming from domestic taxes and ETB 307.3 billion generated from export duties and taxes, showcasing Ethiopia’s diversification of revenue streams.

Despite the record-breaking achievement, Minister Aynalem Nigusse cautioned that challenges remain. “While our country’s tax compliance level is improving gradually, the tax administration’s efforts to collect indirect taxes in particular are being tested by various challenges,” she noted, pointing to persistent issues with taxpayer awareness and attitudes towards VAT.

Looking ahead, the Ethiopian government has set its sights on collecting ETB 1.5 trillion in taxes for the full 2024/2025 fiscal year, with the federal government expected to contribute ETB 900 billion and regional governments ETB 600 billion.

More importantly, the government is committed to increasing tax revenue as a percentage of GDP. Minister Aynalem outlined a plan to boost tax revenue from 6.8% of GDP this year to 7.8% by the end of 2025, and ultimately to 10% within the next three years.

“Achieving this will require solving problems in tax policy and administration,” she explained, highlighting the government’s commitment to streamlining processes, improving taxpayer education, and leveraging digital solutions to control economic activity and formalize the informal economy.

Source: DW Amharic