Ethiopia has officially joined East Africa’s swelling chorus of governments looking to plug fiscal gaps by turning to a fast-growing, sometimes elusive target: the digital economy. On July 17, the country’s parliament passed a sweeping amendment to its income tax law — and for the first time, internet-based creators now have a formal seat at the taxpayer table, whether they like it or not.
The reform introduces a host of new tax measures — from minimum taxation to revamped personal income brackets — but it’s the inclusion of digital content creators that has ignited the most attention and, predictably, some eye rolls. YouTubers, TikTokers, freelance consultants and others earning through online platforms are now expected to register with the tax authority, declare their income, and contribute their bit to the treasury.
The government calls it fiscal modernization. Content creators, civil society, and others who had strongly protested against the bill seem to have other names for it.
Welcome to the New Tax Net
The new Income Tax Proclamation — passed by majority vote (though five MPs voted against and twelve abstained) — includes, among its many features, a minimum tax requirement on all businesses, regardless of profitability. The move targets the not-so-small crowd of companies who miraculously post annual losses but continue to expand operations.
But it’s the government’s newfound interest in digital livelihoods that signals a clear policy shift. Influencers and creators who’ve so far enjoyed the relative luxury of informal monetisation will now be brought under formal scrutiny. Their income — whether from ads, brand partnerships, affiliate links, paid subscriptions, or even crowdfunded donations — is now subject to taxation.
The rationale? In a country where inflation has bitten deep and foreign reserves are thin, any sector with growth and cash flow looks like a good place to start collecting.
“We need to evolve with the economy,” said State Minister of Finance Eyob Tekalign, defending the reform in parliament. “This is about fairness and aligning with international best practices.”
Though the reform includes a few sugar cubes — such as adjusting personal income tax brackets for the first time since 2008 — critics argue these tweaks barely scratch the surface.
Digital Talent, Real Tax Burden
Many online creators see the move as less “reform” and more “revenue grab,” particularly in a country still grappling with post-conflict recovery, shaky digital infrastructure, and spotty enforcement capacity.
The law’s enforcement will rely heavily on electronic reporting, a system that civil society groups say disproportionately penalizes people already navigating informal or hybrid income streams. Others note that Ethiopia’s digital economy — like the economy overall — remains heavily informal, with little state support or clarity around compliance pathways.
To be fair, Ethiopia isn’t alone in its quest to tax the internet. In 2023, Kenya’s own content creator tax saga made headlines when President William Ruto’s administration proposed a 15% tax on digital content monetisation. After loud protests — and some very pointed memes — the rate was halved to 5%. But Kenyan creators still complain of double taxation, thanks to overlapping rules from both income tax and digital services VAT laws.
Not to be outdone, the Kenya Revenue Authority even launched a special unit to chase down taxes from digital companies — a move that Ethiopia’s Ministry of Revenues might soon emulate, assuming budgets allow.
For critics of Ethiopia’s reform, the digital content provision is just one part of a broader austerity-lite package disguised as tax modernization.
Labour unions argue that the law fails the fairness test. “Workers are taxed on what they need to survive, not on surplus,” said Kassahun Follo, President of the Ethiopian Trade Union Confederation. “This reform risks pushing more people into poverty.”
The government did raise the tax-free threshold from a measly 600 birr (USD 4) to 2,000 birr (USD 14.60) per month — a move widely seen as long overdue, given inflation and birr depreciation. The top marginal rate (35%) now kicks in at 14,000 birr/month instead of 10,900. But for many public sector workers, these adjustments barely keep pace with the cost of living.
The bill also introduces simplified taxation for micro- and small enterprises, shifting them into a presumptive tax regime based on estimated sales. While it may ease compliance, critics fear it opens the door to arbitrary assessments and inflated estimates.
Adding to the tension is the inclusion of a flat minimum tax on businesses — a provision that has drawn rare public criticism from foreign investors. Safaricom Ethiopia, which has spent over 350 billion birr (USD 2.5 billion) building its network infrastructure since 2021, slammed the minimum tax as “punitive,” arguing that it punishes loss-making firms investing in long-term growth.
Politics, Pressure, and the G20
So what’s the rush?
The reform comes just weeks after Ethiopia approved its largest-ever federal budget: nearly 2 trillion birr (US$15.4 billion) for FY 2025/26. That figure, when adjusted for the depreciated exchange rate, is around 30% lower than last year’s budget in dollar terms.
Add to that the pressure of restructuring $3.5 billion in bilateral debt under the G20 Common Framework, and the motivations become clear. Ethiopia needs to increase its tax-to-GDP ratio — currently among the world’s lowest — if it wants continued debt relief and investor confidence.
Still, fiscal urgency is not the same as political consensus.
Civil society organisations argue that the law’s benefits skew heavily toward administrative efficiency and revenue targets, with too little attention paid to equity or economic conditions on the ground. Provisions for people with disabilities, informal workers, or cash-strapped young entrepreneurs remain absent.
And as Ethiopia’s internet economy grows — whether via monetised memes, subscription newsletters, or diaspora-targeted YouTube content — the tension between tax collection and economic inclusion will only sharpen.
For now, though, digital creators in Addis and beyond may need to get comfortable with paperwork. Their days of flying under the tax radar are over.