
Addis Abeba – The House of Peoples’ Representatives approved the draft Property Tax Proclamation today, imposing a new levy on land within urban areas, as well as on land improvements and buildings.
According to the provisions of the proclamation, the taxable amount for any property is set at 25% of either its market value or replacement value. The tax rate for land usage rights ranges from 0.2% to 1% of the annual taxable amount, while the tax on buildings and/or land improvements is set between 0.1% and 1% of the taxable value.
The new law allows municipalities to collect revenue through property taxes.
In his presentation to lawmakers today, Desalegn Wedaje, Chairperson of the Standing Committee on Planning, Budget, and Finance Affairs, argued that there is a significant gap between the needs of growing urban populations and the resources available to address those needs.
“The increasing value of urban property is not being adequately taxed, resulting in a shortfall in government revenue,” he stated. “This situation contributes to economic inequality within cities.”
Members of Parliament (MPs), however, expressed concerns about the ability of fixed-income earners and civil servants to afford an additional tax on top of the existing ones.
“The law stipulates that 25% of the market value of the land will be subject to tax. It also states that the tax amount will increase annually,” said Bartuma Fikadu, an MP. “This law favors the tax collector instead of considering the burden on taxpayers.”
Desalegn Chane (PhD), a representative of the National Movement of Amhara (NaMA), argued that imposing an additional tax is unnecessary, given the annual tax collection.
“The government reported collecting 490 billion birr in taxes over the past six months. This indicates that it has the potential to collect over a trillion birr by the end of the fiscal year,” he stated. “This amount is sufficient to cover government expenditures.”
The introduction of the property tax is part of the government’s initiative to increase public revenue.
In June 2024, Finance Minister Ahmed Shide outlined plans to amend value-added tax (VAT) and excise tax laws, as well as introduce new taxes, including property and green levies.
Initially presented to lawmakers in June 2024, the bill was subsequently referred to the Standing Committee on Planning, Budget, and Finance Affairs for further review and scrutiny.
On 12 December, 2024, the Standing Committee convened discussions with stakeholders concerning the draft Property Tax Proclamation and its provisions.
During the session, Eyob Tekalign (PhD), State Minister for Finance, underscored that the draft law should be seen as part of efforts to modernize Ethiopia’s economy.
“By enabling cities to have stronger financial capacities, it will facilitate the creation of a better tax base to improve the quality of life in every city,” he stated.
However, several lawmakers expressed concerns regarding the fairness and effectiveness of the proposed property tax law.
Ewnetu Alene, Chairperson of the Standing Committee on Democratic Affairs and a participant in the discussion, is one of the MPs who raised questions about the potential burden the tax proposal might impose.
He remarked, “In our country, the majority of taxes are imposed on low-income individuals, particularly urban residents and government employees. Are we improving the tax system by overburdening these segments of society? Shouldn’t we instead impose higher taxes on those owning extensive land and properties to better support low-income citizens?”
Ewnetu also questioned, “Can this draft proclamation help us achieve fairness in wealth distribution?”
He further elaborated, “Some proclamations appear favorable when presented to Parliament and are approved, but they ultimately impose a heavy burden when implemented.”
Addis Standard reported on the matter in October 2023, when the bill was first presented for public deliberation.
During the discussion, stakeholders expressed concerns about the potential impact of the draft bill on the average Ethiopian’s finances, given the numerous taxes already burdening citizens, such as VAT and income tax.
The bill also faced criticism regarding its timing, with concerns raised about its introduction amid ongoing inflationary pressures. AS