The Prime Minster’s Office has rejected an appeal to consider a corporate profit tax reduction for manufacturing companies by 17pc from a flat rate of 30pc. However, the Office accepted most of the recommendations forwarded by the national think-tank, the Ethiopian Policy Studies & Research Centre.
Last Monday Prime Minister Hailemariam Desalegn met officials from the policy think-tank and representatives from the manufacturing sector to discuss the challenges of the industries which have led the sector not to be as effective as anticipated.
The meeting also aimed to recommend major policy adjustments. Out of eight uncovered binding constraints of the manufacturing sector, the Centre identified a tax related issue and recommended that government to consider revising its policy to reduce the business tax rate, depreciation method and tax-deductible rates.
“The main reason to conduct the research was the poor performance of the manufacturing sector according to the expectation of the government industrial policy, and the questions of survival in the sector,” said Amare Matebu (PhD), lead researcher at the Centre.
The poor performance of the manufacturing sector can be seen in the number of businesses currently operating: out of 17,519 business licenses issued in the past 25 years, only 1,873 (10pc) of them are currently fully operational.
There were eight main findings of the research regarding the manufacturing sector challenge; the tax issue was one of them. After going through the major challenges the research came up with recommendations and held discussions with stakeholders with a direct relation to the manufacturing sector. The discussion was mainly on how to solve the challenges of the sector.