Minister of Finance Ahmed Shide ordered a temporary suspension of accrued social welfare taxes imposed on importers, citing delays and implementation difficulties since the enforcement of the regulation. He sent a letter to the Customs Commission three weeks ago, signifying a decision pending further investigation into the hurdles faced by importers.

The social welfare tax, introduced in the last fiscal year as part of the government's strategy to broaden the tax base, was projected to generate 22 billion Br. Set at three percent on imported goods, the tax had specific exemptions, including capital goods, fertilisers, and petroleum products.

Tax authorities had been calculating the new charge by combining the value of imported commodities, freight expenses, and insurance fees. The collected fund was earmarked for rebuilding infrastructures damaged by the conflict in the north and addressing gaps in the aftermath of the pandemic.

The contention arises from the Customs Commission's delayed order for implementation. The order was issued five months after the initial approval of the social welfare tax regulation by the Council of Ministers in 2022. The failure to commence timely implementation has resulted in a substantial backlog, leaving importers unable to adhere to the levied tax.

Zerihun Assefa, communications director of the Customs Commission, attributed the delay to the wait for the inclusion of the social welfare tax code and the Federal Negarit Gazette. This delay hindered the integration of the social welfare tax code into the system, affecting 16 out of the 18 branches.

"We were waiting for the code to be added to the system," he said.

Ethiopia's economy was adversely impacted by soaring expenditures as a result of civil war, political instability, a pandemic, and rising global commodity prices. Surging budget deficits have prompted officials to boost revenue collection. Ministry of Revenue reported that 64.7 billion Br was collected from foreign trade taxes and duties in the first four months of the fiscal year while aiming to generate approximately six billion Birr from the social welfare tax.

Importers anxious over unpaid duties expressed a collective sigh of relief following the Ministry's decision while they await clarity on the fate of the social welfare tax and its implications.

As the industry anticipates the results, Kassahun Tasew, a clearing agent with 20 years of experience, highlight his frustration. He disclosed that the Commission briefed them about the social welfare tax six months after its approval, and importers were being asked to pay three percent of the tax for a period when the commission had not designated a code in the declaration time.

"They could've uploaded the code immediately," said Kassahun.