Leaders of a sector that brings some of the scarcest hard currency are warning that new tax measures could force companies to shrink operations, lay off workers or shut down, opening a fresh fault line between tax authorities and one of the country’s principal foreign-exchange earners.

The Ethiopian Pulses, Oilseeds & Spices Processors & Exporters Association (EPOSEA), which represents more than 500 companies along the oilseed and pulse value chain, claim that recent tax measures, including a minimum alternative tax and a quarterly advance tax, have imposed a "disproportionate tax burden" on its members. The revised regime, the Association's leaders argue, requires firms to pay even when profits are reported, draining cash from companies already short of it.

Regulators from the ministries of Trade & Regional Integration (MoTRI) and the Revenues (MoR) reviewed research the Association had commissioned. It was presented last week at the Inter Luxury Hotel, on Marshal Tito Road, where exporters and importers made their misgivings of the amended tax law public. Simeneh Bessie (PhD), the acting general manager, characterised the reservation as a sector-specific test of the government's wider tax-reform agenda.

Officials of the Trade Ministry have already conceded that the 2.5pc levy is poised to cut export revenue and pile severe pressure on the sector.

The room captured that tension. According to exporters, operating under the laws would be difficult unless relief was granted. Federal officials acknowledged the pressure but resisted carving out exemptions, arguing that firms unable to turn a profit should reconsider whether to remain in business.

The Association's findings sharpened its leaders' case, revealing that the fall bore heavily on producers, processors and businesses in a sector defined by volatile prices and narrow margins. The survey of members found that 87.1pc were wrestling with a severe liquidity crisis and 84.2pc reported shrinking margins. The operational fallout could be abrupt, with 31.6pc of respondents disclosing plans to shut down. While 31.6pc expected to raise prices, 21.1pc seek alternative funding, and 15.8pc intend to cut their workforce.

For exporters who lean on bank credit and seasonal buying, the Association argued, the measures pull cash out when it is most needed.

Pulses and oilseeds rank among Ethiopia's largest foreign-exchange earners after coffee, underpinning the balance of payments and the livelihoods of smallholder farmers and rural workers, with shipments going to China, the United States, Saudi Arabia and Germany. Industry representatives warned the tax changes could blunt competitiveness in those markets and soften demand for crops at the farm gate.

According to Hayder Kemal, the Association's board member, the alternative tax and the demand for quarterly advance tax equal to 25pc of annual obligations create "significant challenges" for exporters working with long capital cycles. They pay for purchases, storage, processing, transport and shipment before any payment arrives from foreign buyers.

"Demanding a quarter of the tax up front, before profits are realised, leaves less for daily operations and limits the crop exporters can buy from smallholders," he told Fortune. "It also deepens reliance on bank loans, raises financing costs and squeezes smaller firms, threatening lower volumes and weaker foreign-exchange earnings."

The wider trade figures set the backdrop. Ethiopia set an export target of 9.4 billion Br for the budget year, a target federal trade officials claim exceeded by 115pc in the first eight months. They disclosed that over 11 months, 1,488tn pulse, oil seed and spices of commodities were exported, with agricultural exports bringing 2.45 billion Br, manufacturing 333.1 million Br and mineral resources 3.6 billion Br.

Exporters translated the policy into plainer terms, arguing that the burden lands hardest on low-margin firms that may owe tax even when they earn little or nothing. The mechanism collides with the government's own export-promotion goals, draining working capital before shipments clear, forcing companies to borrow more, delaying purchases, or passing costs down the chain. Slower growth, several warned, would make it harder to maintain relationships with foreign buyers.