The Amhara regional state starts taxing khat in an effort to limit the use of the stimulant.
The tax will be imposed while the product is being transported or sold in the local market, and traders will be required to pay 30 birr for every kilogram of khat.
It will be levied on top of the income and value-added or turnover taxes that khat businesses already had to pay like all other enterprises.
The new directive went into effect on August 18, 2022.
“Due to the rapid growth of khat consumption in the region, it has been found necessary to impose a levy on khat production to help change this situation,” reads the directive.
During the last harvesting season, more than 235,000 farmers have produced more than 68,000 quintals of khat on 10,886 hectares of land in Amhara Region, which expects 204 million birr in revenue from the new tax.
“Efforts are underway to replace khat with other crops,” said Alebachew Aligaz, the region’s agriculture bureau crop director. The directive would complement this initiative.
The task of identifying and presenting potential locations for khat markets falls to the towns and woredas in the region. Businesses engaged in Khat will be subject to taxation in these areas.
Businesses that transport khat from one location to another are also going to be charged 30 birr for each kilogram of the stimulant. Even though the khat is already subject to tax in the city or town from where it is being transported, there will be a double taxation, if the stimulant is found 24hours after initially being charged.
In order to control people who attempt to escape taxation by using outdated tax receipts for new supplies, the bureau also plans to stamp the date of taxation on a receipt that will be given to traders. Only two hours are allowed for the issued receipt to be used in the town or woreda where the tax was collected.
Khat, one of Ethiopia’s top five exports, brought in USD 392 million for the fiscal year that ended in 2021/22, a USD 10 million drop from the previous reporting period.
The illegal trade is the primary cause of the drop in khat export earnings. In the first month of the just started fiscal year, 30.9 million birr worth of khat was confiscated, according to the Ministry of Trade and Regional Integration.
The Oromia region is the country’s largest khat producer. Annually, farmers in the region produce 1.3 million quintals of khat. Previously, the region collected a chat levy in accordance with a khat product proclamation adopted in 2000. It imposes a three-birr levy on one kilo of khat.
“In compliance with that law, we are no longer levying a tax. A new rule governing the taxation of khat products is currently being drafted in the region,” said Revenues Bureau specialist, Daniel Jaleta, adding it “would be ratified in a month.”
