International banking services, remittance and electronic transactions are up for value-added taxation as the Ministry of Finance officials contemplate widening the tax base.

Loans and credit disbursements, deposits, bonds, shares, pensions and provident funds and cash transfers are exempted from VAT while the regulation for interest-free banking services is left open for later imposition.

The legal experts drawn from the finance and revenue ministries have been preparing a draft bill to replace the 20-year-old proclamation since last year and released the first draft for comment in August. However, the services that were exempted from value-added tax (VAT) were not clearly stated.

The federal budget assumes revenue growth of 37pc from last year to reach 439 billion Br. Close to 28pc of the revenues are from income tax and 45 billion Br (10pc) from value-added tax on services.

A consumer tax levied on imported goods, domestic services, and sales, is the government’s primary revenue source. It accounts for 21pc of the 279 billion Br collected by federal tax authorities last year.

Banks were not present at the meeting held last week at the Ministry's hall to discuss the proposed bill imposing consumption tax on financial services citing that they did not get official invitations.

The Ethiopian Bankers Association lobby for the 22 commercial banks. Its Secretary General, Demsew Kassa, is not aware of the discussion. However, the officials have not planned to call for another meeting.

Aklilu Wubet, president of Wegagen Bank, question the timing of expanding the tax base in the country's current economic climate. Last year, his bank generated 40 million Br from fees and commissions, netting over half a billion Birr profit. According to Aklilu, commercial banks should be given time to develop a system that complements the request.

The major shareholder of Tilahun Chala Import & Export Plc, Tilahun Chala believes the inflationary price of goods and services is the result of multiple factors. The commissions to open letters of credit asked by the private banks increased from the prior years, while the shipping cost forced traders to adjuted offers on the imported goods, said Tilahun.

Incorporated 10 years ago, the company began exports of coffee, oilseeds and pulses with 20 million Br and imported tyres with up to 100 million Br. Tilahun claims the tyre cost saw a 10,000 Br increase from last year now close to 43,000 Br.

"The VAT imposition may exacerbate the price," said Tilahun.

Established with commercial banks and the National Bank of Ethiopia in 2015, EthSwitch S.C., facilitated close to 40 million interoperable ATM transactions worth 44 billion Br processed. Last year the payment switch operator reported 221 million Br in gross profit, registering a growth of 153pc from last year’s performance.