Ethiopia Introduces New Vehicle Ownership Tax with Revenue-Sharing Plan

Ethiopia is preparing to implement a new motor vehicle ownership tax scheduled to take effect in the 2027/28 budget year, according to a government document obtained by Capital. The tax is part of a broader fiscal reform aimed at generating additional revenue and establishing a formal revenue-sharing mechanism between federal and regional authorities.

The Council of Ministers is expected to submit the proposal to the House of Federation by the end of December 2026, setting the stage for legislative approval. The document outlines a structured system where proceeds from the tax would be distributed among different levels of government, though specific rates and allocation percentages have not yet been disclosed.

Motor vehicle owners across Ethiopia will be directly affected by the new levy, which adds to existing costs of vehicle operation. The government has not released details on how the tax will be calculated—whether based on vehicle value, engine size, or other factors—but the move signals a shift toward more formalized taxation of personal property.

Analysts say the tax could help address infrastructure funding gaps if properly implemented. However, concerns remain about the burden on households already facing inflation and fuel price hikes. The government has yet to announce any exemptions or transitional relief for low-income owners.

As the proposal moves through the legislative process, stakeholders including transport associations and consumer groups are expected to lobby for adjustments. The House of Federation’s review will be a key step in shaping the final law.

Article source: capitalethiopia.com | Image credit: Capital Newspaper