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Ethiopia - House imposes 150% tax on hide and skin exports
By Kirubel Tadesse
The House of People’s Representatives has passed a proclamation to toll export taxes up to 150% on raw and semi-processed hides and skins, at its 16th regular session on Thursday, February 07, 2008.
The proclamation rates and basis of computation states that raw hide and skin shall be levied 150% of its value and wet blue cow hides is levied at 20%. Pickled sheep skins are levied 10%, with wet blue sheep and wet blue goat skins also levied 5%. The house passed the bill in first reading as per proposed motion to do so despite opposition Members of Parliament request to examine the proclamation in standing committees.
Minister of Finance and Economic Development Sufian Ahmed, told the House that the bill reverses the ban on export of raw hides and skins by allowing export at 150% export tax. He said that the measure takes Ethiopia one step closer to the World Trade Organization as banning exports is not encouraged by WTO. He explained that the tax system could serve as an instrument to encourage industries engaged in the production of hides and skins to shift to exporting processed hides and skins from exporting raw or semi-processed hides and skin.
The bill empowers the Ministry of Finance and Economic Development the authority to adjust the tax rates. Article 7 of the proclamation states that the Ministry may at its own discretion increase rates and exempt in whole or in part the tax levied by the proclamation. This empowerment resulted in a strong resistance from opposition MP, Temesgen Zewde.
Temesgen stated that he wanted the people to know that they opposed the motion, decided by majority, to let the House pass the bill on first reading. Temesgen argued that the constitution only gives the House of People’s Representatives the authority to impose, adjust or exempt tax. “When we impose the tax, we will force many factories to go out of business and that creates a chance for few but strong companies to enjoy the market, which will create a monopolistic tendency in the sector,” Temesgen said commenting on the bill. “We should first talk to the exporters and seek solutions to the problems they state. Whether it is skilled manpower or credit, whatever is keeping them from adding value to their export; it should be first assessed so that they and the sector could transform. Otherwise the targeted solution cannot be achieved through imposing an overstated tax.”
Bulcha Demeksa (MP) also opposed the bill, stating that he couldn’t find grounds to understand the rush to pass the bill without looking at it in detail in standing committees. “One way or another it is a burden on the poor people who sell raw hides and skins in the street. Exporters will transfer the burden by lowering the price they pay for the products,” explained Bulcha. “At this time when our poor people are hammered with the expensive cost of fuel, it is not fair to impose this tax which will harden their lives.”
Sufian replied that the bill is no surprise to the sector because the government was discussing it a year and half ago. “The exporters were told last year that the new tax system would be effective as of February 9, 2008. We held continuous discussions on the problems they face and on solutions so that they can export value added products. This 150% tax can’t be a burden to anyone since exporting raw hides and skins was totally banned and what we are doing now is reversing the ban with this tax,” Sufian added. Sufian added.
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