Ethiopian Parliament Approves Major Amendment to Federal Income Tax Law to Align with Digital Economy











Addis Ababa, Ethiopia — July 17, 2025In a significant legislative development, the House of Peoples’ Representatives has approved a draft amendment to the longstanding Federal Income Tax Proclamation. The decision was made during the House’s second emergency session held today, signaling the government’s push toward modernizing its fiscal framework to reflect evolving economic realities.

The revised proclamation aims to establish a more responsive and inclusive tax system, with particular emphasis on the integration of the digital economy and enhanced revenue mobilization mechanisms.

Modernizing for the Digital EraPresenting the draft to parliament, Desalegn Wedaje, Chair of the Standing Committee on Planning, Budget, and Finance, emphasized that the previous proclamation, in place for many years, had become outdated and ill-equipped to regulate the growing digital and platform-based economic activities.

“This amendment introduces a modern tax framework that reflects the realities of a digital economy,” Desalegn stated. “It will broaden the tax base, reduce loopholes, and curb tax fraud, ultimately enhancing the government’s capacity to collect domestic revenues more effectively.”

Economic Relevance and Investment ClimateMinister of Finance Dr. Job Tekaleng highlighted the broader economic significance of the amendment, explaining that it is part of a broader strategy to adapt fiscal policy to Ethiopia’s rapidly changing economic environment.

“The proclamation reflects our commitment to building a fairer and more efficient tax system. It will support our national growth objectives by ensuring that both traditional and emerging economic sectors are equitably taxed,” Dr. Tekaleng noted. He also reassured the public that income tax reforms would not place an additional burden on low-income earners, adding that the government continues to take steps to improve their living conditions.

The minister further stated that the updated tax legislation is expected to boost investor confidence by increasing transparency and predictability in Ethiopia’s fiscal regime. “Creating a tax environment that is both investor-friendly and resilient to abuse is essential for attracting sustainable foreign and domestic investment,” he added.

Tackling Tax Evasion and Ensuring EquityThe amendment includes provisions designed to minimize tax evasion, strengthen enforcement mechanisms, and ensure more equitable contribution across income brackets and sectors. Analysts suggest that the law will help formalize parts of the informal economy and bring digital enterprises, including e-commerce platforms and gig workers, into the tax net.

Startup Proclamation Also Unanimously PassedIn a related development, the House also reviewed and unanimously passed the long-awaited Startup Proclamation. The legislation aims to create an enabling environment for early-stage companies, streamline regulatory processes, and promote innovation-driven entrepreneurship in Ethiopia.

Together, the two proclamations represent a strategic shift in the government’s economic policy framework—prioritizing modernization, inclusivity, and revenue sustainability in the face of a rapidly evolving domestic and global economy.