A new task force formed to revamp the tax regime of the nation has begun operations with the primary aim of increasing tax revenue.

The task force started operations two weeks ago and is studying and reviewing prior assessments and studies prepared for the taxation system in Ethiopia. The new body is tasked to reform the tax system in the country and will focus on revising investment incentives.

Led by Eyob Tekalign, state minister of Finance in charge of budget, the task force was formed with the recommendation of the Macroeconomic Committee, chaired by Prime Minister Abiy Ahmed (PhD).

"It has been a long-standing issue but has been pushed to the front with the goal of increasing domestic revenue mobilisation," said a source close to the case.

In the current fiscal year, the Ministry of Revenues plans to cover 68pc of the total budget of the nation, 346.9 billion Br, from tax revenue, of which 213.9 billion Br is expected to be generated from domestic tax revenue sources. The plan, despite the performance history of the Ministry in the past fiscal year that fell 50 billion Br short of the targeted tax revenues, is one-third of the target.

The review will mainly focus on tax holidays, exemption and incentives that are believed to be mismanaged and abused.

"The revision will convert these privileges to be performance-based," the same source told Fortune.

With the aim of encouraging both local and foreign investments, incentives that include tax exemptions and holiday periods are granted to investors based on the remoteness of their investment from the capital. Investments in areas with slow economic activities and infrastructure development get over a decade and a half of tax holidays, including a 100pc tax exemption from customs duties.

"There is no other country like Ethiopia that gives excessive investment incentives," said Adanach Abebe, minister of Revenues, last week while listing the factors that led her office to have a poor performance on tax revenue collection.

For the past five years, total merchandise worth 400 billion Br were imported to the country with duty-free privileges, according to data from the Ministry of Revenues.

Different studies and research have also disclosed that these packages are mismanaged and exposed to corruption and maladministration.

An assessment carried out by the Federal Ethics & Anti-Corruption Commission last March reveals that the country’s duty-free incentives and tax exemptions of nearly one-third of the business transactions sampled were open to corruption.