The Trillion Birr Tale

Welcome to this week’s edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

Topics this week:

• 💊 BUZZ: VAT just became a harder pill to swallow

• 🪙 Money Matters: How Ethiopia plans to spend ETB 1 Trillion

• 👨‍👩‍👧 Premiums to Payouts: The real stakes of life insurance

Thanks for reading!

BUZZ: VAT’s Up! Taxing Times Ahead

ወይ VAT!

The tax that we all grew up with is extending its arm.

Lawmakers are mulling over a bill that will potentially include the famous 15% "pass-through tax" on services previously exempt like transportation, electricity, water, and e-commerce, among others.

Increasing the VAT scope will have an effect on consumer spending 📉 in the short run but is intended to boost government income for spending on infrastructure and different socio-economic initiatives to help boost ⚡ the economy.

To put it into context, this new VAT bill will in essence:

• Make you even more aware of the time you spend in the shower (saving water)

• Question whether or not a RIDE trip is worth getting out of your house

• Have you cut back on TikTok videos you enjoy during lunch break (Tele will be asking for the extra 15% on data)

Resistance from the public is expected, after all, the cost of living is already through the metaphorical roof! VAT is especially felt by low-income earners since all income is taxed: income tax when you get your salary and VAT when you spend all your money. Whereas, high-income earners are able to have savings, so not all income is taxed.

But there’s a silver lining: increased government income & spending typically correlates with a dynamic private sector…typically. This aligns with the Home-Grown Economic Reform (HGER) which encourages increased private sector participation in the Ethiopian economy.