2. It’s a tax on income of farmers and farming communities together
with fee imposed on the land owned for this purpose.
In Ethiopia, its currently the exclusive preserve of the Regional
Governments,
In most developing countries, governments impose taxes on
agricultural income, but it is hard to determine the income of
smallholder farmers and to reach the income earners.
These difficulties are due to the high number of small units of
income generation, the absence of accounting procedures suited to
income taxation, the fluctuating nature of agricultural productivity
and profits, and low level of education.
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3. 1967-1975 agricultural income taxation was made part of the main
income tax system (Schedule “D”)
Since 1975, it constituted autonomous income tax regimes- it concerns
more than 80% of the population with low living standard and attract
political sensitivities through out history.
Though the sector has been the mainstay of the Ethiopian economy,
paradoxically, its contribution to the national revenue is often negligible.
Special rules of assessment and collection are stipulated
The income brackets and tax rates are lower than the case in the
main income tax system.
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4. With the adoption of a federal form of government in 1991, the
jurisdiction over agricultural income taxes has gone to the
Regional Governments. Art. 97(3) of the Constitution
◦ This decentralization has resulted in wide diversity in the modes of
taxation.
◦ Many of the Regions initially followed the progressive agricultural
income tax system inherited from the experience in the unitary
Ethiopia but in recent times some reverted to a cruder form of
agricultural income taxation based on the size of land holding rather
than the amount of annual agricultural production.
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5. For example
Oromia initially adopted a progressive tax system, but replaced this practice with
a tax based on the size of landholding (# the amount of agricultural produce).
See the Oromia National Regional Government Rural Land Use Payment
and Agricultural Income Tax Amendment Proclamation No. 99/2005
In Benishangul-Gumuz and Gambella the tax base of agricultural income
taxation is the annual agricultural produce (and therefore predictably varies
from year to year)
See the
See the
In Tigray and Harari the tax is fixed on the basis of the size of land holding.
See the
See the
In SNNPR the tax burden varies with the specialty produce of the area, its
location or the kind of production. E.g. higher rates of agricultural income tax
are imposed on holders of land used for chat or coffee production b/c of the
higher market value of these commercial crops.
See the
See the
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6. In principle, relatively the land taxes are less complex on agricultural income
tax.
Because to assess the land tax it requires the total area of the land, its location
and type of land grade that shows suitability for irrigation, land fertility
and rural transportation for a market.
Based on this information, countries adopt a simple presumptive tax structure.
The smallholder farmers could decrease the burden of the land use fee from their
expenditure budget by improving and enhancing the productivity of the
farmland.
It may apply based on discriminate tax rate and by holding equitable factors for
production to tax less for the most productive than the least productive farmers.
According to Bird and Slack (2002), land taxes are based on the property value
tax that could improve the financing of decentralized resource mobilization that
would help development oriented programs in rural areas and municipalities.
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7. According to the amended proclamation number 77/1997 of income tax for land
use and agricultural activities, the smallholder farmers in the regional states are
taxed Birr 10 for the first hectare and Birr 7.5 for each extra half hectare.
In some regions, the areas of land and the land classification system that is based
on relative soil fertility estimates determine the level of taxation.
During 2004- 2014 the total rural area cultivated are expanded for agricultural
purpose increased by 2.7 percent per year and the number of smallholder
farmers rose by 3.8 percent.
The total agricultural output level also increased.
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