Current Tax Situation

Under the current federal income tax law, workers earning between 7,800 and 10,900 ETB per month are required to pay up to 30% of their salary in taxes. However, CETU argues that this is unfair to low-income workers who are already struggling with the high cost of living.

Suggested Tax-Free Threshold

CETU has proposed that the minimum income threshold for tax exemption should be raised to 8,300 ETB per month. This figure is based on international poverty standards, which consider individuals earning less than $2.15 per day as living in extreme poverty.

Alternative Proposals

The Ministry of Finance is currently reviewing three options for the tax-free income threshold: 1,200 ETB, 1,600 ETB, and 2,000 ETB. However, CETU argues that these options are still too low to reflect Ethiopia’s economic realities and cost of living.

Comparison to Regional Standards

CETU cited Kenya as an example, where workers earning up to 24,000 KES (~32,000 ETB) per month are exempt from income tax. They argue that a similar standard should be adapted to fit Ethiopia’s conditions.

Government Response

In response, the Ministry of Finance’s tax policy director, Ato Mulaye Woldu, acknowledged that increasing the tax exemption threshold could result in a significant loss of government revenue — possibly up to 0.6% of the national income if the threshold is raised to 2,000 ETB.

Looking Ahead

While the Ministry of Finance focuses on increasing domestic revenue to support its 1.93 trillion ETB federal budget, CETU insists that tax policy should also prioritize the living conditions of workers and ensure fairness.

“You can’t build a nation by taxing only payroll-based income and ignoring capacity-based taxation,” said CETU President Ato Kassahun Follo, calling for the government to review and adopt a just income tax policy.

Reported by: Doche Velle