The Contribution and Trends of Tariff Revenue in the Ethiopian Tax Structure

Abstract

Revenue collection from internationally traded goods is one of the core roles of Customs Administrations in many developing countries. Currently, the Ethiopian Revenues and Customs Authority (ERCA), the only government department authorized in the country to collect taxes from foreign trade, is also collecting customs duties, excise tax, value added tax (VAT), surtax, and withholding tax from imported goods to the country. These taxes provide considerable revenue to the government. The central theme of this Article is to evaluate the performance of customs duty towards its contribution to total government revenues. To achieve this objective, two important measurements of a tax revenue performance, the ratio of the tariff revenue to the total government revenues and the revenue productivity of the tax base in the study period (1959/60-2012/13), are analyzed first. Then, both the share and the trend of customs duty in the trade taxes, total taxes and total government revenues are analyzed, respectively. The trend of customs duty/GDP ratio is also included in the analyses. The findings of the analyses indicated that although its share in the government budget is significant, the effective tariff rate is much lower than the average tariff rate; its contributions to both the total tax revenues and total government revenues have also declined over time. Therefore, the identification of the responsible factors for this low performance of the tariff revenue in the country needs further investigations.

Keywords: tariff revenue, revenue productivity, government revenue, foreign trade taxes