Draft Excise Law Proposes Tax on Airtime

Ethiopians may soon be paying a 5% excise tax on their phone calls and internet usage if a new law is approved by parliament. The proposed excise law, which imposes a tax on telecommunications services, could directly affect around 70 million telecom users in Ethiopia.

The government decided to revise the current excise tax law, which was last updated two years ago, after assessing its strengths and weaknesses. The draft is currently in its final stages of being formulated and the parliament, in its 9th Regular Session held yesterday, has referred it to the Standing Committee on Planning, Budget and Finance.

Excise tax, a type of indirect tax that is imposed on specific goods or activities, such as cigarettes and alcoholic beverages, is not paid directly by the customers, but rather by the supplier or producer, who incorporates the tax into the product’s price.

If the draft legislation is passed, it could result in higher costs for phone calls and internet access (including mobile data packages and fixed broadband subscriptions) as service providers Ethio Telecom and Safaricom Ethiopia may transfer the additional costs to their customers.

Apart from these changes, the amendment also lowers the excise tax levied on vehicles and exempts television and video cameras from excise tax.

Ethio Telecom is one the biggest taxpayers in Ethiopia and last year it paid 18.8 billion birr in taxes. Telecom service consumers in Ethiopia already pay value-added tax (VAT), which is levied at 15 percent.

Other countries, such as Kenya and Tanzania, have also implemented similar taxes on airtime and data. In Kenya, these taxes have become a major source of excise revenue.