|Food and beverage services|na|16.6|na|54.4||112||61|
|---|---|---|---|---|---|---|---|---|
|Retail trade|**44.8**|**22.8**|**60.7**|**35.6**|355|392|305|392|
|Transit services|59.1|na|67.6|na|81||108||
|**% of firms with sales <50,000 birr**|||||||||
|Manufacturing beverages|na|99.1|na|99.5||113||94|
|Food and beverage services|na|92.2|na|62.1||112||61|
|Retail trade|**74.0**|**88.7**|**60.1**|**85.6**|355|392|305|392|
|Transit services|50.4|na|56.5|na|81||108||

Source: Author’s calculations using ESS 2018/2019 and ESS2021/2022. Note: Significant differences at p _<_ 0.05 are shown in bold.

# **_3.3 Sector composition and implications for the presumptive tax_**

Male-owned businesses are more likely to pay taxes on incomes (17% versus 7% of female enterprises as shown in Table 3) and larger businesses are more likely to pay taxes than smaller businesses (see Appendix 7). By imputing how much presumptive tax would be paid using the tax code, the results show that a lower share of female enterprises (16.8%) would be liable for the presumptive tax compared to male businesses in period 2 (61% in Table 3). Further, between the two surveys, there was a change in the percentage of businesses estimated to be in the tax net (earning revenue above the tax-free threshold). For female enterprises, the share of businesses in the tax net dropped (from 29.9% in period 1 to 16.8% in period 2) because a higher share operated in sectors _with_ a tax-free threshold in period 2. The drop in the share of female businesses in food and beverage services – a sector without a tax-free threshold – contributes to this result. In contrast, for male enterprises, a larger share is operating in sectors _without_ a tax-free threshold – such as transportation services and construction – and there are more firms with earnings exceeding the exemption threshold (50,000 birr p.a.) in period 2, so the proportion estimated to be in the tax net is 17 percentage points higher (44% in period 1 versus 61% in period 2).

Disaggregating by turnover quartiles, Table 5 shows that the shifts in sector distribution between the two surveys result in a lower share of the female businesses and a higher share of male businesses in _nonexempt_ sectors (without a tax-free threshold). In Appendix 6, the exit and entry of businesses (for households observed in both periods) show that, compared to female only households, male or dual adult households are more likely to have reported a new business in period 2 and are less likely to have lost an enterprise, resulting in a net gain of businesses for male or dual households. In contrast, there is no change for female households. By sector, 3.6% of female only households lost a food service enterprise, while 1.7% of male or dual households gained a transit enterprise. During the two surveys, several factors may have contributed to the fall in the share of food and beverage service businesses, including the conflict in Ethiopia, the pandemic, and the worst infestation of locusts in 25 years, which posed a threat to food security.<sup>13</sup>

> 13 See https://www.aljazeera.com/gallery/2020/10/21/in-picture-ethiopia-struggles-to-suppress-desert-locust-infesta t

12