The Ministry of Industry (MoI) is presenting a document which requires The Ministry of Finance and Economic Cooperation (MoFEC ) to revise the excise and surtax levied on garments.
Under the Excise Tax Proclamation No 307/2002 10 percent of an excise tax is levied on textiles of any type partly or wholly made from cotton which is gray, white, dyed or printed, in pieces of any length or width /except mosquito nets and “Abudgedi” including blankets, bed sheets, counterpanes, towels, table clothes and similar articles.
And the MOI which requested that MoFEC asked to free all the excises taxes levied on garments.
The ministry also requested the removal of the 10 percent surtax which is levied to encourage beginners in the textile industry.
Tadesse Haile State Minister of MOI said at the discussion with textile investors and stakeholders that the removal of the tax is expected to be applicable in the coming two months.
‘’We all are working for the same result, if a certain proclamation hinders our progress we can change it through discussions. We have seen that excise and surtax levied on the textiles are hampering local investors from doing more work and we are requesting that MoFEC remove it and I hope they will approve our request.’’
In addition to that the Ministry also requested the removal of the Second Schedules Tax Incentives (which the government set a low tax on the import of some special goods which highly discourages local manufacturing competitiveness and encourages traders and importers. And MOI suggested MoFEC either increase the tax on imported goods or allow manufacturers to utilize the second schedule.
In the last fiscal year the government targeted to earn USD 78 million from the textile sector but only 47.3 of the plan met the target. The actual amount was USD 20 million lower than the previous year.
Problems in infrastructure, shortages of foreign currency, long bureaucracy in getting loans, poor coordination among the stakeholders, weak work quality are the major challenges that threaten the textile sector.
In the current fiscal year the government planned to earn 356 USD by bringing 23 projects which are expected to have 6.9 billion birr working capital.