Ethiopia needs more tax revenue. The harder question is where it should come from.

Collections reached Birr 1.518 trillion in 2025/26, nearly triple their level two years earlier. Yet the latest tax amendments widen the VAT net to smaller businesses and professionals, even as households contend with rising food, fuel and electricity costs.

The deeper problem may not be tax rates, but collection. Weak enforcement, administrative gaps and exemptions for some larger firms risk shifting more of the burden onto smaller taxpayers.

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