Coffee exporters collecting their beans from farms in the Oromia Regional State are subjected to a new tax imposed by municipalities and weredas in the region.

Experts from the Oromia Revenues Bureau and the region’s Urban Planning Institute jointly conducted a study to determine the type of services municipalities provide and the amount of taxes they could collect. Sample cities were selected to implement the study over six towns status. The Institute sets tax brackets for services after the assessment allowing towns to prepare their own regulations. Getachew Nega, director for infrastructure and municipal revenues improvement at the Institute, confirmed his office provided the revised model.

However, the municipalities of towns in the regional state approved directives three months ago, imposing between two Birr and five Birr tax for every kilogram of coffee leaving the region.

The surcharge on coffee products is collected as a service tax for the municipalities and wereda offices of over seven towns.

Jimma city, 352Km west of the capital, charges exporters three Birr for a kilo. The city incorporated coffee into the list of services it provided two months ago. Exporters mainly charged for their exchanges through the Ethiopian Commodity Exchange (ECX) and transportation.

“Their trucks will be parked for up to two days,” said Seifu Kemal, general manager of Jimma Revenues Office.

The city charged 25 Br for a quintal last year and collected eight million Birr.

This is the first time a regional authority levying additional tax on a commodity which generates the largest export revenues for the country.

Ethiopia exported over 280,000tns of coffee last year, generating a record of 1.4 million dollars. More than 65pc of this volume was sourced from the Oromia region. Coffee grows mainly in the country’s southwestern part, with prominent areas being Yirgacheffe, Sidamo, Kaffa, Harrar, Jimma, and Limu. Close to 4,000 farmers grow coffee in Oromia state.

“The taxes collected by the government are too small,” said Lemessa Ayele, deputy director of the Oromia Revenues Bureau.

He believes the newly instituted surcharge will also make the export system accountable.

Exporters do not feel the same way. Industry players complain that the newly introduced tax discourages exporters in the sector. It makes exporters less competitive in the international market as they sell through negotiations, which pushes them out as their prices go up. Commercial coffee products are sold based on prices in the New York market, except for grade one and speciality coffees.