The clock is ticking for telecom giants in Ethiopia as a new tax law looms on the horizon. Government officials have set ambitious revenue targets counting on taxes from cellular services.
Facing uncertainty, operators like Ethio Telecom and Safaricom Ethiopia must soon navigate looming legislation that threatens to vastly expand what they owe if approved.
In its budget approved last month, the government plans to rake in 16 billion birr from telecom VAT alone during the current fiscal year.
A proposed VAT legislation is in the final consultation stages to modernize decades-old rules and allow a 15 percent levy on an expanded list of goods and services.
The draft law includes anyone licensing telecom operations locally or abroad that provides phone services, distributes products, or acts as an agent. Prepaid options like prepaid cards and phone card recharges are also flagged for taxation whether physical or digital.
During his address to lawmakers, Finance Minister Ahmed Shide stressed efforts to broaden the tax base through VAT reforms and excise taxes. New social responsibility and stamp duties are also slated for introduction next year.
Of the estimated total government revenue of 559 billion birr, over 440 billion birr is expected to be collected from various taxes. The 48 billion birr projected VAT revenue incorporates an ambitious 16 billion birr target from cellular and telecommunications firms.
Ethio Telecom announced plans to generate 90.5 billion birr this fiscal year, beginning July 20, 2023. A second license will be issued before 2023 ends, according to officials.