The Ministry of Industry accepted last week a proposal by the Ethiopian Textile and Garment Manufacturers Association to lift excise tax and to lower custom duty tax on imported textiles.

Late in August, a new study had proposed that the 10 percent excise tax imposed on imported textile products be lifted.

The study also suggested that separate taxes be imposed on finished and partially finished textile products replacing the indiscriminate 35 percent tax.

The proposal was made following a study by the association of textile producers in collaboration with concerned government bodies.

Results of the study indicated that the association and the government had reached a common understanding that it was not right that all kinds of textile products should be taxed uniformly, Sleshi Lemma, director general of the Institute of Textile Industry, had said.   

According to the study, the agreement concerning the inappropriateness of the excise tax on textile products was reached as a result of the common understanding that clothes were not luxury goods.

The tax was imposed to protect the local industries from competition on the assumption that the local factories could supply the needed fabric to the garment companies.

The 35pc import duty tax in Ethiopia is very high compared to other countries in the East African Community and the Common Market for Eastern and Southern Africa (COMESA), where the tax ranges from zero to 25 percent.

Source: Fortune