UK puts £35m into tax overhaul programme in Ethiopia

The UK government has signed its largest ever tax partnership programme to help Ethiopia transform its tax system to increase its annual revenues so that it can better finance its own services and development, becoming less reliant on aid

The move was announced during a visit to Ethiopia by Penny Mordaunt, international development secretary, who said the Department for International Development (DFID) will plough £35m into what will be its largest bilateral tax programme.

This is designed to transform Ethiopia’s tax system, helping it to harness the potential of its booming economic growth as the country industrialises.

Penny Mordaunt, international development secretary, said: ‘Ethiopia’s security, development and prosperity matter for the UK – which is why we’re working with the country to help it generate more tax from its rapid growth. This will help Ethiopia fund its own development – and ultimately transition beyond aid.’

Ethiopia's GDP growth rate for 2017 was 10.2% compared to the previous year, making it the fastest-growing of the East African countries and, with the second largest population, is forecast to be Africa's fastest growing economy in 2018. Corporate income tax is set at 30% and personal income tax has for more than a decade been set at 35%. In the most recent available data it collected only 11.6% of GDP in tax revenue, and expected to collect an estimated tax take of $6.7bn (£5bn) in 2017/18. 

Despite its significant growth, the country is currently accommodating over 900,000 refugees from across the region and remains dependent on international aid. According to DFID figures, it received £332m from the UK in 2017.

Report by Pat Sweet

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