The study is an attempt to investigate the impact of FDI flows on tax revenues in Ethiopia both at aggregate and disaggregate tax revenue levels that include income tax, corporate tax, trade taxes and business profit tax.
The Ethiopian Value Added Tax of 2002 follows the standard approach of exempting financial services from VAT. Not all ‘financial services’ are, however, exempted from VAT. A number of services provided by the financial institutions are made taxable by the VAT laws of Ethiopia.
The revenue provisions of the Ethiopian Constitution are striking on a number of levels. By and large, the revenue provisions do not evince conformity with what the theories of fiscal federalism generally prescribe in the area of assignment of revenue powers. In addition, the revenue provisions of the Ethiopian Constitution are more detailed than their counterparts elsewhere.
Tax systems are continuously changing as countries align their tax systems with evolving economic, political, and administrative conditions. Ethiopia has also pursued this track of tax reform following the shift in the economic policy of the government. Since 2002, The Ethiopian tax reform has brought about significant changes to the enforcement aspect of the tax system.
The contemporary tax reform projects in the world, especially in developing and transition countries, are under the sway of international institutions, theories and experts influenced by developed countries. The repercussion of such tax reforms on development endeavours of a nation can be quizzed from different angles.