The right to impose taxes on property ownership is granted to regional states after a joint session of legislative houses passed a resolution on January 11, 2023.

Co-chaired by Tagesse Chaffo and Agegnehu Teshager, house speakers for parliament and federation, the members of the two houses voted to give the mandate to regional states, dividing it with the federal government.

According to the resolution, regional states give the collection mandate to the local administrations within their constitutional powers.

Agegnehu reiterated the constitutional provision allowing the legislative houses to devise a resolution when such undefined issues arise.

Standing Committees of the plan, budget and finance and Subsidy Budget & Shared Revenue Affairs have put forth the motion to allow cities and local administrations or give the authority for regions and divide it between the federal and regional states, with the final vote gaining more than two-thirds.

However, Parliamentarians questioned the affordability, equity, and relevance of imposing property tax during galloping inflation. Leaders of the standing committees Shimelis Abdisa, Desalegn Wedajo and Minister for Finance Ahmed Shide defended its relevance and timing in promoting and supporting growing "urbanisation."

The majority of the members said the resolution is appropriate and will allow the revenue collection system of our country to be updated and help provide basic services to the society by expanding the infrastructure.

Some argued the public is already burdened with taxes, and towns should not be given the authority to tax property but to use their internal revenue.

According to Shimelis Abdisa, president of the Oromia Regional State, the resolution will facilitate the fair distribution of resources, prevent corruption, expand the tax base and address the budget deficit. He said it empowers regional states to develop their cities and towns in their own capacity while decreasing the unemployment rate with the finance.

The resolution was ratified with four votes against and five abstentions.

Minister for Finance Eyob Tekalign (PhD) praised the resolution as a “significant move” that gives the Ministry the green light to prepare a bill.

Eshetu Gebremariam, standing committee member of Urban Infrastructure Development & Transport Logistics said collecting property taxes from commercial centres and real estate helps create job opportunities and ease the rising poverty.

"It's a significant step in filling the regional states' budget deficit," he said.

Eshetu told Fortune that a draft proclamation on a national level is underway on the rates and division.

Tadesse Lencho, an Assistant Professor at Addis Abeba University and managing partner at Tbest Law Firm, has researched Ethiopian tax policy and legislation. He explained that the resolution allows citizens to get the basic infrastructure if appropriately implemented.

According to him, property tax helps to develop urbanization and has to focus on residential buildings as the commercial ones already have a lot of taxation to cover. Therefore, he recommends the government strictly watch not to double tax those sectors.

Tadesse believes it should be carefully implemented, not to let regional states enter an unhealthy competition, setting regulations and control.

PUBLISHED ON Jan 14,2023 [ VOL 23 , NO 1185]

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