Ethiopia’s Ministry of Finance has halted the enforcement of a retroactive excise tax on fruit drink manufacturers, following concerns that the policy had placed disproportionate financial pressure on local producers, Capital News reported.

Under the original directive, firms were required to settle unpaid taxes dating back four years, including penalties and interest, after the Ministry of Revenue reclassified certain packaged beverages as excisable products.

The decision stemmed from a 2023 clarification by the Ethiopian Food and Drug Authority, which specified that only drinks containing at least 30% fruit concentrate or pulp qualify as fruit juice.

The Ministry of Finance cited the retroactive application of the tax as unfair. In a September 22 letter signed by former State Minister Eyob Tekalegn, now Governor of the National Bank of Ethiopia, officials noted that manufacturers had been penalised for taxes that had never been collected from consumers, creating severe liquidity pressures. The letter confirmed that enforcement would be paused pending a permanent regulatory solution.

Prior negotiations had offered manufacturers the chance to pay back taxes without interest or penalties, including instalment arrangements. Most producers, however, cited an inability to meet the obligations. The revised policy now limits excise tax payments to products sold after the Ministry of Revenue’s November 2023 implementation letter.

Industry representatives welcomed the clarification, noting that the earlier demand, averaging 70 million birr per manufacturer, had forced most local producers to halt operations. The Ministry of Industry had formally raised concerns with the Ministry of Finance in April, highlighting the competitive disadvantage compared with untaxed imported beverages.