Taxi drivers looking to take advantage of duty exemptions on the imports of knocked down vehicle parts for domestic assembly are left reeling as officials at the Ministry of Justice have ruled the directive outlining the tax privileges void.

The decision is a major blow for close to 1,500 members of taxi associations who have been hoping to capitalise on a directive issued by the Ministry of Finance (MoF) in May last year, allowing the import of semi- and fully-knocked down vehicle parts free of excise tax and duty. Officials at the Finance Ministry sent an amended version of this directive a month ago to the Ministry of Justice, a federal agency tasked to verify the harmonisation of bills for consolidation and codification.

Signed by Addis Getnet, deputy director-general at the Justice Ministry, a reply letter says the directive contradicts the existing customs law, amended in 2019. There is no legal ground for the functionality of the directive, reads the letter issued on December 13, 2021.

The Finance Ministry has the mandate to grant duty-free privileges on imported goods. However, the Council of Ministers has the authority to decide on the conditions in which duty-free rights are granted.

The Addis Abeba City Administration, together with the former Federal Transport Authority, launched a project two years ago to replace aged blue-and-white taxis with new vehicles, facilitating loans from commercial banks. The authorities had wanted to see the imports of 10,000 disassembled vehicles for transport services. The initiative later expanded to taxi associations with the privilege to buy cars assembled locally with duty-free imported parts after the Finance Ministry issued the directive earlier this year.

Taxi associations have been clamouring for the permits to import vehicles duty-free since, and dozens of them have partnered with Elauto Engineering Plc, a local assembler incorporated three years ago with the capacity to assemble 100 cars a day. Among them is an association dubbed '19 Star.'

Founded by Wondafraw Girma and his peers six months ago, '19 Star' is one of the seven recently formed taxi associations partnered with Elauto Engineering. Under the terms of the agreement, the company consented to assemble and deliver four types of vehicles with prices ranging from 650,000 Br to 720,000 Br.

“We paid the company 30pc of the total cost as an advance,” says Wondafraw.

The process had been riddled with obstacles even before the recent ruling from the Justice Ministry. The associations were required to acquire permits from the Ministry of Finance to allow Elauto Engineering to import the parts duty-free and assemble the vehicles domestically.

“Without the permits, Elauto Engineering cannot do anything,” said Bekele Abebe, general manager of the company.