Duty-free rights and privileges for import and export goods will only be granted by the Ministry of Finance, according to a new bill legislated last week.

Twenty-four government institutions had previously been authorised to approve duty-free rights and privileges for investors. The proclamation removes this power from these other institutions and transfers it solely to the Finance Ministry.

The Council of Ministers issues regulations on the conditions in which duty-free privilege rights are granted and implemented, while the Ethiopian Investment Commission, the Ministry of Mines & Petroleum and the regional administrations were the institutions that have been issuing duty-free privileges.

The new proclamation will close the doors for economic sabotage that has been widespread in the country in the name of duty-free privileges, according to Lemlem Hadgo, chairperson of the Revenues, Budget & Finance Standing Committee of parliament.

Beyond the mismanagement of the privilege, the former system created inconveniences for investors, requiring them to knock at the doors of different institutions to get the rights, according to the proclamation.

"It ‘ll  save money and the time spent by investors to obtain the privileges, since the service will be centralised," reads the proclamation, which was drafted by the Ministry of Finance as part of the recent initiative that aims at easing the regulatory climate in the country. The bill was legislated during an emergency parliamentary session held after parliament left for recess.

Over the past five years, merchandise valued at 400 billion Br were imported into the country with duty-free privileges, according to data from the Ministry of Revenues. The value exceeds the federal government budget approved for this fiscal year.

Studies and research commissioned by different institutions have also disclosed that these packages are mismanaged and exposed to corruption and maladministration.

The Federal Ethics & Anti-Corruption Commission’s assessment launched last year in March reveals that one-third of the sampled duty-free privileges and tax exemptions were open to corruption. For the assessment, the Commission sampled 433 businesses in Addis Abeba and Dire Dewa that received investment incentives.

Import of excess duty-free goods beyond the value allowed by the regulations; abusing the privileges by importing non-duty free items; selling the products imported through these privileges to third parties; and the transfer of these rights between businesses without using the proper channels, are among the findings of the Commission.

Authorising the regional states to approve duty-free privileges and rights was wrong from the start, according to Yohannes Woldergbraiel, a tax law expert.

"The regional states were making decisions on the federal government's revenues,"  Yohannes told Fortune.

Before the legislation of the new bill, the Ministry of Finance had introduced a new system that compels public institutions to submit quarterly reports of duty-free privileges and tax holidays they granted to import and export commodities. The quarterly report, which aimed at ensuring transparency, was also tabled in parliament by the Ministry of Finance.

Centralising the incentive administration system is positive, according to Abebe Abebayehu, commissioner of the Ethiopian Investment Commission, one of the agencies that had been authorising tax incentives.

"Incentives have a great effect on the macroeconomic situation of the country," said Abebe. "If the country foregoes revenues that have to be collected from taxes, it has a direct impact on the budget deficit."

But the new procedure does not divert the one-stop service of the Commission, according to Abebe.