A proposed amendment to Ethiopia’s Income Tax Proclamation is facing growing backlash from civil society groups, tax experts, and salaried workers over the absence of clear tax brackets for individuals, raising concerns about transparency, fairness, and compliance in the country’s evolving tax regime.
The draft law, currently under parliamentary review, introduces several new taxation categories, including digital content income and small business tax bands under ‘Category B’ taxpayers. However, it conspicuously omits progressive income tax tables for salaried employees, leaving millions of workers uncertain about how their wages will be taxed under the revised system.
Unlike the small business provisions—which clearly outline tax rates ranging from 2% to 9%—the law does not define any specific rate bands for personal income, nor does it clarify existing deductions, exemptions, or thresholds.
The proposed corporate income tax remains capped at a flat 30%, yet stakeholders have also criticised the draft for lacking details on allowable business deductions, raising questions over how corporate liabilities will be computed fairly across sectors.
The growing digital economy is also affected by the ambiguity. Content creators and digital entrepreneurs are now classified under business income, but no specific tax rate has been assigned. Instead, the draft vaguely states that the Ministry of Revenue will issue guidelines at a later date, sparking anxiety among those operating in the online space.
“This level of uncertainty is a problem for wage earners, freelancers, and digital entrepreneurs alike,” said a local tax consultant. “Without knowing what percentage of their income will be taxed, individuals cannot plan their finances. This goes against global best practices in tax policy, which prioritize clarity and predictability.”
Analysts argue that the government’s preference for administrative flexibility—allowing tax authorities to issue rates through directives instead of parliamentary law—undermines public trust and may even violate the principles of legislative oversight and taxpayer rights.
The controversy is expected to dominate discussions at a stakeholders’ consultation meeting scheduled for next week, where representatives from civil society, the private sector, tax experts, and digital entrepreneurs are expected to demand greater transparency and push for:
Publication of detailed income tax brackets, particularly for salaried individuals,
Clear guidance on digital content taxation, and
Timely issuance of supplementary directives for the new tax categories.
Civil society organisations have also called on the Ministry of Revenue to launch a public awareness campaign to educate taxpayers—especially young entrepreneurs and digital workers—on their obligations under the new law.
“The digital economy is growing fast, and so are tax obligations,” said a representative of a local NGO. “The government must bridge the awareness gap or risk widening informal compliance.”
If passed in its current form, the law could complicate payroll management for employers, many of whom rely on clearly defined tax tables to compute pay-as-you-earn (PAYE) deductions.
Experts say that while modernising the tax code is necessary, especially to capture emerging sectors like digital content creation, vague language and deferred decisions can discourage compliance and increase the risk of tax evasion.
Until lawmakers revise the draft or issue accompanying directives, taxpayers—especially employees and digital entrepreneurs—remain in the dark on how much they will be required to remit under the revised system.
