| Image may be NSFW. Clik here to view.  |
| Farmers connect a small water pump in Kossoye, Ethiopia. ©IFAD/Petterik Wiggers |
One of the main impediments to growth of the irrigation sub-sector in Ethiopia has been the insufficient supply of irrigation equipment and technology. This is due to a number of factors, but high among them is high taxation of irrigation accessories and technology which makes them relatively expensive. The burden of most of these taxes is passed on to the end users. For people who are highly dependent on agricultural production the costs impact the very people the equipment is supposed to be helping.
Tariffs make up a significant part of the cost for irrigation pumps and parts. The same tariff applies to imported drip and sprinkler irrigation kits, since they are categorized as tubing and ancillary equipment. Under standard tariff rates, for example, pumps are taxed for duty and other taxes including VAT, which adds up to 42.15 per cent of the pre-imported price.
To help reduce these costs, IFAD participated in the a study of irrigation sub-sector bottlenecks while co-chairing the National Agricultural Water Management Platform. A detailed cost-benefit analysis of lifting the taxes was also conducted with the support of Alliance for a Green Revolution in Africa (AGRA). The findings showed that lifting the taxes could lead to an increase in land area under irrigation, increase in production, job creation from additional investment from tax incentives, and create income tax from these additional jobs.
The findings were presented to the Government by the Ministry of Agriculture which resulted in tax exemption for irrigation technologies and equipment. Tax exemption was also approved for agricultural machinery spare parts, animal feed ingredients and compound feeds for the next two years.
This is one measure to show how the government is committed to change policies to incentivize smallholder farmers adopt irrigation technologies and equipment. As the current co-chair of National Agricultural Water Management Platform, IFAD continues to engage with different organizations and government to promote issues that benefit smallholder farmers in the country.
