LEGAL ANALYSIS OF TAX HOLIDAY INCENTIVES UNDER ETHIOPIAN INVESTMENT LAW: IN COMPARISON WITH KENYAN INVESTMENT LAW

Abstract

This study analysis tax holiday Incentives under Ethiopian Investment Law in comparison with Kenya Investment Law. The objective of the research is to analyze Ethiopian tax holiday incentive package provided in Ethiopian investment laws in comparison with Kenyan tax holiday incentive. The study adopts doctrinal comparative legal research that analyses the relationship between the two countries tax holiday incentives. Even though the objectives of tax holiday incentive are creating conductive environment for foreign private investors, tax holiday incentives in Ethiopia investment law are questionable. The incentive packages are far from achieving their objectives resulting in low social costs, including revenue losses for government. The research suggests that Ethiopia should learn from Kenyan tax system, and needs to critically analyze tax incentive environment, and introduce necessary changes in its investment incentive packages especially tax holiday incentive. It recommended to creating enabling conditions by focusing on infrastructure development and fundamental determinate of incentive. It is not, however, to recommend that the government should move immediately away from offering incentives; but to advocate that the incentive given on should gradually mix some elements of performance-based incentives.