The Ethiopian Petroleum Supply Enterprise (EPSE) will begin collecting a new fuel tax next month as part of the government’s ongoing fiscal reforms. The measure introduces a combined 30 percent levy on petroleum products, consisting of a 15 percent value-added tax and a 15 percent excise duty.

The government has been gradually reducing fuel subsidies since mid-2022 to curb public spending, a move that has contributed to rising pump prices. A targeted subsidy for public transportation will remain in place to cushion low income households, as authorities aim to balance subsidy reform with foreign exchange policy adjustments.

Under the new arrangement, EPSE will remit all federal fuel taxes to the Ministry of Revenue. The Ministry of Finance plans to achieve full cost recovery for petrol and diesel, including statutory taxes, by December 2025. The budget for net transfers to EPSE will be capped at Birr 30 billion in the upcoming fiscal year.

The government’s recent budget reaffirmed its commitment to the Homegrown Economic Reform Agenda, citing the need to increase revenue in a country where the tax-to-GDP ratio remains below 7 percent. Complementary measures, including the Minimum Alternative Tax, aim to expand the tax base. 

Source: Capital Newspaper