Under Ethiopia’s upcoming income tax proclamation, individuals and businesses making cash payments exceeding Birr 10,000 in a single transaction could face significant penalties.

According to Ato Tewedaj Mohammed, Head of the Legal Affairs Department at the Ministry of Finance, the primary objective of the new law is to discourage excessive cash transactions and promote financial transparency.

As outlined in the draft, if a cash transaction exceeds Birr 10,000, the excess amount will be disallowed as a deductible expense for the payer. Additionally, the recipient will face a penalty of double the excess amount.

While the measure aims to control unregulated cash flows, some experts involved in drafting the proclamation have raised concerns about its practical enforcement. They argue that rather than imposing blanket penalties, reforms should first address the root causes in the business system that drive reliance on cash.

The draft exempts government bodies, development organizations, banks, and microfinance institutions from this cash limit. The Ministry of Finance will issue a directive listing any additional exemptions.

Source: Sheger FM 102.1