The Ethiopian Labour Confederation (ELC) has formally called on the federal government to raise the income level exempted from personal income tax, arguing that current thresholds burden low- and middle-income workers and slow poverty alleviation efforts.
At a press briefing in the capital, ELC President Mesfin Urgessa appealed to policymakers to lift the tax‑free ceiling from ETB 600 to ETB 1,200 per month doubling the threshold to reflect rising living costs and inflationary pressures. “Our members struggle to make ends meet. This measure is vital to improve real incomes and boost household welfare,” Urgessa said.
The ELC emphasised that a higher exemption band would immediately increase take-home wages for millions of workers while minimally affecting government revenues. It noted that cushioning low-income earners supports consumer demand and strengthens local economies, which could offset potential tax revenue losses over time.
The confederation also recommended a simplified sliding-scale tax regime, suggesting a stepwise structure of 10%, 15%, and 20% brackets tied to different income bands. “A progressive tax system is fairer and better aligned with international practice,” Urgessa added.
In response, government revenue officials indicated they are reviewing the proposals as part of wider reforms to the fiscal regime. They highlighted that any adjustments to the tax threshold must balance social equity with the need to finance essential public services such as healthcare, education, and infrastructure.
Economic analysts welcomed the ELC’s initiative, calling it timely given Ethiopia’s inflation rate—hovering at around 25%—and the rising cost of living in major urban centres. They warn that without policy action, workers’ real incomes will continue to erode, potentially undermining productivity and domestic stability.
If approved, the proposed change would take effect at the start of the next fiscal year. Until then, dialogue continues between the labour confederation, government revenue authorities, and members of parliament on the way forward.
The ELC’s call adds momentum to national debate over tax fairness and economic inclusion, underscoring the evolving policy discourse in Ethiopia’s rapidly growing economy.
