Ethiopia's property tax overhaul stalls as regions fail to pass implementing laws
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No regional state or city administration has enacted the legislation needed to implement Ethiopia's 2025 Property Tax Proclamation, leaving collection fragmented and dependent on outdated rules, an Institute for Fiscal Studies report says.
Ethiopia's property tax reform is facing widespread delays, with no regional states or city administrations having enacted the legislation required to implement the new framework, according to a report by the Institute for Fiscal Studies (IFS). The federal government enacted Property Tax Proclamation No. 1365/2025 in 2025 to standardise administration nationwide, but regional states and city administrations have yet to pass the regional proclamations needed to operationalise tax rates.
The federal proclamation was designed to establish a uniform property tax system, empowering regional and municipal authorities to boost domestic revenue collection while improving administrative transparency and efficiency. Under the framework, a property's taxable value is set at 25 percent of its market value, leaving regional governments, city administrations and municipalities to determine specific rates within prescribed minimum and maximum boundaries.
The IFS report warns that the absence of regional legislation has created deep inconsistencies. Most cities lack a unified system and revenue collection remains heavily fragmented. “Consequently, property tax revenue collection remains fragmented; cities and municipalities, including Addis Ababa, have been collecting property tax — historically referred to as ‘roof and wall’ tax — relying on outdated legal frameworks,” the report states.
Beyond property tax bottlenecks, the report highlights broader structural weaknesses in Ethiopia's tax performance relative to regional peers, including a large agricultural sector, a low urbanisation rate, administrative shortcomings and deliberate policy choices such as maintaining a value-added tax rate below the regional median. It also points to fuel taxation discrepancies: statutory frameworks mandated a 15 percent VAT and a 30 percent excise tax on fuel until 2023, before the excise rate was cut to 15 percent, and these legal rates were not consistently enforced over an extended period.
Citing underlying research, the IFS noted that Ethiopia experienced the sharpest decline in tax revenue relative to the size of its economy of any country globally between 2014/15 and 2023/24, despite real GDP growth of 9.2 percent in 2024/25. Indirect taxes, including VAT and excise, fell from the equivalent of 6 percent of GDP in 2014/15 to 2.5 percent in 2023/24, trade taxes dropped from 2.1 percent to 0.7 percent, and direct taxes declined from 4.6 percent to 2.9 percent over the same period.