The Value-Added Tax Styles: Which is Adopted by Ethiopia?

Abstract

Currently many developed and developing countries has already adopted Value added tax (VAT) and others actively providing their intentions to introduce it. Among the three VAT model existed across the globe, Ethiopia executed that of New Zealand’s model of goods and services tax (GST). The Ethiopian VAT replaces the out dated sales taxes that have operated for more than four decades by January 1, 2003. The intention of the government to adopt VAT is that of raising large amount of revenue as the engine of development and to redistribute income and wealth among members of the community residing in a state, for fulfillment of the WTO agreement and to implement the IMF directions. Hence, the Ethiopian VAT is the consumption type of tax that has 15% standard rate without reduced, zero rate and some exemptions as implied by the rules and regulations. Though some problems were there in the areas of administrations, VAT crediting and exemptions, dealing with the technological advancement and innovations, the future aspects of the Ethiopia’s VAT taxing system are quite bright.

Keywords: Value Added Tax, Ethiopia, Literature review, Policy implications