Strikes and protests in volatile Oromia state reflect widespread anger over business tax rises as the government tries to reduce its reliance on aid
In the dense cobblestone streets of Burayu town, outside Addis Ababa, Melaku Abdella* and his family had been making a living selling basic items such as vegetables, cooking oil and soft drinks at competitive prices from their kiosk. But after the Ethiopian government stung him with a more than 300% tax increase last month, Abdella says he was left with no option but to close the business.
Like many low-income traders in the countrys Oromia region, the family didnt keep accounts, meaning the authorities based their annual tax demand of 7,000 Ethiopian birr (231) on an estimate of income. Its beyond my capacity to pay. I will have to hand in my business licence, Abdella says.
The hikes on grocers, barbers and cafes were met with widespread anger and protests in parts of the volatile state, which has endured unrest and fatal clashes during the last two years.
The situation creates a dilemma for a government that is desperate to increase income tax and reduce its reliance on aid, but is also wary of further instability. Ethiopias parliament only lifted a 10-month state of emergency earlier this month following protests over land disputes and alleged political marginalisation. The unrest since November 2015 involved security forces killing at least 600 demonstrators and tens of thousands being jailed, according to the government.
Although still one of worlds least developed countries, Ethiopias economy has grown rapidly in the last decade, as the government used loans, aid and tax revenue to build clinics, universities, roads, railways and hydropower dams. Its budget has increased roughly in line with gross domestic product. Ethiopias tax revenue is around 14% of output, according to the International Monetary Fund, which is lower than the sub-Saharan African average. This financial year, almost a third of the federal budget of 321bn birr (10.6bn) is projected to come from aid and loans.
Ethiopias ruling coalition has been credited for overseeing growth and improving infant mortality and life expectancy, but it is also blamed for suppressing democratic rights, maladministration, increasing corruption and, now, the draconian tax swoop.
The root of the dispute is a sizeable semi-formal economic sector around 80% of the workforce is still employed in smallholder agriculture entrenched mistrust between the state and traders, and an estimation system for small businesses.