Research in Brief 115

Presumptive tax has become a popular way of taxing businesses operating in the informal sector in middle- and low-income countries. The introduction of the presumptive tax system in Ethiopia in 2002 was intended to widen the tax base by bringing more informal sector operators into the tax net. However, the unintended consequences of its introduction were not adequately scrutinised, and it has been a source of criticism and complaints due to its alleged unfairness and lack of clarity in its implementation.

A simple imposition of the presumptive tax upon the informal sector, without considering its complexity and the diversity of its actors, might have various negative consequences. In particular, it would likely compromise both horizontal and vertical equity. This study examines the issue empirically, exploring the equity implications of the presumptive tax system to tax the informal sector in Addis Ababa. The informal sector receives limited attention from either policymakers or researchers, and, prior to this research, we had no evidence on the characteristics of informal micro enterprises and the equity implications of Ethiopia’s presumptive tax system.


Fissha Asmare Marye

Fissha Asmare is a Research Fellow at Scotland's Rural College (SRUC).

Seid Yimam Mohamed

Seid Yimam is based at the Institute of Development Studies, working as a Research Associate focusing on tax administration, gender and tax compliance, informal tax, and environmental taxes. He is also a PhD student in Economics at the University of Sussex on a scholarship funded by ICTD. Outside of the field of taxation, his main research areas are in contemporary development focusing on Agriculture and Food Systems Transformation. He holds an MSc in Economics (Policy Analysis) from Addis Ababa University and an MSc in Economics from the University of Copenhagen. He worked as a Research Officer at the International Food Policy Institute (IFPRI) and the Policy Study Institute (PSI), and he was also a lecturer of Economics at Debre Berehan University in Ethiopia prior to joining ICTD.

Etsehiwot Semreab

Etsehiwot Semreab is a lecturer at Kotebe Metropolitan University.
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