The Ministry of Finance (MoF) has promised to reduce and change the excise tax levied on bottled water manufacturers.
Bottled water industry representatives had frequently asked the government to reconsider the excise tax imposed on bottled water production.
Via their association they met with relevant bodies like the tax policy director and people advising minsters. They met often at MoF over the past few weeks to discuss the issue, according to Ashenafi Merid, General Manager of Ethiopian Bottled Water and Soft Drinks Manufacturing Industries Association (EBWSDMIA).
The government announced that it would amend the existing excise tax proclamation which had expanded the types of products that could be taxed and increased the amount of indirect tax. They also plan to reduce the tax percentage on some products and exclude others from excise taxes altogether. Excise taxes are also known as sin taxes and are imposed on luxury items or those harmful to health.
According to sources, the excise tax on water products could be calculated on sales as opposed to production in the upcoming proclamation.
“Currently our factories are paying excise tax not only on the production but on the importation of raw material which is affecting the sector,” Ashenafi said.
The government claimed that even though water is basic and a type of food, bottled water manufacturers affect the environment. The tax is being imposed to mitigate this. The general manager of the association said members have agreed to help the environment by collecting wasted plastic and recycling. Ashenafi argued that “currently industries are working on recycling and some new industries are established to process the plastic to fiber.”
If the tax scheme wasn’t changed some of the factories would be closed, according to the General Manager.
He told Capital that the government representatives have promised the percentage rate would be changed and collected from sales.
We have conducted our own study showing the stated tax effect on the sector, which employs many people and provides experience to others.
Kenya and Uganda don’t tax bottled water, but Ethiopia’s tax is 20 percent. The excise tax makes the product expensive, while the product is basic. They also argued the tax by mentioning ‘the food, medicine and health care administration and control’ proclamation.
The food, medicine and health care administration and control’ proclamation 661/2009 in its definition states that “food” means any raw, semi-processed or processed substance for commercial purpose or to be served for the public in any way intended for human consumption that includes water and other drinks, chewing gum, supplementary food and any substance which has been used in the manufacture, preparation or treatment of food, but does not include tobacco and substances used only as medicines.
We insist the government kill the excise tax on water since it is basic for the community. The excise tax on bottled water is calculated on the packaging not on the water.
The association has 80 members in the water industry and other about 15 new comers are under preparation to commence their production. The association has also included soft drink manufacturers.
For the current year the government has targeted to collect 10,366.3 birr and 8,738.1 birr from import goods and local products respectively. The sum of two is about nine percent of the total targeted tax collection for the year that is about 211 billion birr.