Following strong resistance from water bottlers, the Ministry of Finance is reviewing a new excise tax rate imposed on bottled water.
Through their association, water bottlers strongly opposed the 15pc excise tax imposed on the selling price of bottled water products. Drafted by the Finance Ministry, the bill was tabled to legislators in parliament a few weeks ago.
Last week the Budget & Finance Committee of the parliament held a public hearing on the bill, which is going to replace the 17-year-old proclamation. Bottled waters are categorised under the commodities that have a negative effect on the environment. With the proposed rate, the price for a litre of water will climb to 11.5 Br.
The initiative for reviewing the tax rate of bottled waters arises following the public hearing at the parliament and a panel discussion jointly organised by the Ministry of Finance and the Ministry of Revenues at Skylight Hotel.
The discussion that was held on December 31, 2019, was attended by Eyob Tekalign (PhD), state minister for Finance, Adanech Abebe, minister of Revenues, Hiwot Mossia, state minister for Transport, and Eshete Asfaw, state minister for Trade & Industry.
State Minister Eyob confirmed to Fortunethat his Ministry is reviewing the rate.
“We're reviewing the rate,” Eyob told Fortune. "The new rate is expected to reach parliament the following week."
The industry operators took the lead by building plastic recycling companies to recycle the plastic bottles, according to Ashenafi Merid, president of the Bottled Water & Soft Drinks Manufacturing Industries Association.
"The industry recognises its responsibility and is working with waste recyclers to tackle the destructive impact the plastic bottles have on the environment," Ashenafi said during the discussion.
Sino Aluminum, East African Bottling Collectors Association, Coba Impact Manufacturing Plc, and Universal Plastic Factory Plc are waste recyclers actively operating in the country. The recyclers are also members of the Association and work with the bottling companies to abate the plastic bottle waste.
Avante Water, a brand of the Turkish company General Group Beverages, which joined the market in early April of last year, is building a recycling plant in Debre Birhan. The bottler has finished installing the machinery and is prepared to commence operations within a few months.
PETCO Ethiopia, a branch of a South African non-governmental organisation, has Aqua Addis, Abyssinia, and One Water as its board members and is engaged in the collection and recycling of the bottles.
He also explained that the rate is lower than in neighbouring countries. He mentioned that Kenya, which has over 600 water bottlers, imposed a five percent excise tax on bottled water.
Currently, there are over 90 bottled water producers in the country producing over 3.5 billion litres of water annually. The government plans to collect close to 254 million Br in excise taxes from the water bottlers this year.
GIZ-Ethiopia is also technically supporting the recyclers strengthening the value chain process and creating jobs by assisting young people to form associations to collect plastic water bottles.
Tadesse Lencho (PhD), assistant professor of law at Addis Abeba University's School of Law & Governance, has a different view. He says that bottled water should be subjected to excise tax, since it is a luxurious product, but not for its environmental effect.
"Considering the living standards of the country," said Tadesse, "bottled water is considered a luxury commodity."
Tadesse also argues that the government should stop the approach of imposing taxes on products or services with negative impacts as a means to solve the problems.
"Every problem can't be solved with taxes," he said, recommending the government use an innovative approach like making the bottlers spend on environment protection to attenuate the impact.
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