Sunday, March 7, 2021


Yibekal Tadesse Abate

Keywords: Fiscal Federalism, Sales tax, VAT, Constitutional Status, Ethiopia

Haramaya Law Review  Vol 8 (2019)                                                         DOWNLOAD .pdf


Whatever form of tax assignment a federal system of government adopts, an assignment of taxation power for each tier of government shall be determined under the constitution. The FDRE Constitution is detailed in terms of allocating taxation powers between the federal government and the regional States.

Despite this, following the late introduction of value-added tax (VAT), there are arguments concerning the taxation power over it. Pieces of legal literatures deem VAT as an undesignated tax while, on the other side, some persons argue that it is a designated one. This leaves the constitutional status of VAT in Ethiopia to remain questionable. Practically, it is the federal government that takes the legislative competences over all sources of VAT in the country. This paper aims at examining the stance of the FDRE Constitution concerning taxation power over VAT and to scrutinize whether VAT is practically levied as per the VAT assignments set under the Constitution. Finally, the paper argues that the FDRE constitution has designated VAT (as a family of sales tax and ‘in other forms’ too) for both tiers of government within their respective taxation powers. In fact, it is also revealed that there are certain undesignated VAT sources from which the government practically collects a VAT. There, the existing practice where the federal government takes the legislative competence over VAT sources shall be re-visited in light of the constitutional provisions.

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