The executive branch of the Ethiopian government consists of both an elected president, who is the chief of state, and a prime minister, who is the head of government. Cabinet ministers are selected by the prime minister and approved by the House of People's Representatives, the lower chamber of the bicameral parliament. Members of the lower chamber are directly elected by popular vote, while members of the upper chamber, the House of Federation, are chosen by the various state assemblies. The president and vice president of the Federal Supreme Court, the chief institution of the judicial branch of government, are recommended by the prime minister and appointed by the House of People's Representatives.
In June 1994, the first democratic multiparty elections in Ethiopia's history took place, ending a 3-year transitional period that commenced following the overthrow of the Derg regime. During the transitory phase, the Eritrean People's Liberation Front (EPLF) assumed control of Eritrea and established a provisional government in the Ethiopian province. In April 1993, the EPLF administered a separatist referendum under the auspices of the United Nations (UN), which subsequently formed the basis of a declaration of independence at the end of that month. Thereafter, Eritrea was recognized internationally as an independent sovereign nation. Since 1998, Ethiopia and Eritrea have officially been engaged in a border war as a result of territorial disputes.
The June 1994 national elections resulted in an overwhelming victory for the Ethiopian People's Revolutionary Democratic Front (EPRDF), a coalition of numerous ethnically based Derg-opposition movements led by the Tigrayan Peoples' Liberation Front (TPLF). The TPLF initially entered politics as a Marxist guerrilla movement bent on overthrowing the Derg regime. As the leading party in the EPRDF, however, the TPLF has officially adopted a pro-democracy and pro-free market stance, as its economic and political policies clearly make manifest. Nonetheless, the U.S. Department of State argues that the EPRDF displays certain residual (left-over) control-oriented tendencies, which result from the party's quasi-authoritarian guerrilla past (during the insurgency, the TPLF was directed necessarily as a military unit). The recently held 2000 national elections saw the EPRDF return to power, and Meles Zenawi, the leader of the party, is serving his second term as prime minister. Most observers have agreed that Zenawi's government has pursued sound policies, which have contributed to economic growth and reductions in unemployment.
Several other parties also add to the plurality of Ethiopian political life, including the Coalition of Alternative Forces for Peace and Democracy (CAFPD); the Ethiopian Democratic Union (EDU); The Ethiopian Movement for Democracy, Peace, and Unity (EMDPU); the Ethiopian National Democratic Party (ENDP); the Oromo Liberation Front; and the All-Amhara People's Organization (AAPO), not to mention dozens of other smaller parties. While most parties are more or less prodemocracy and pro-free market, several Ethiopian parties, including the last 2 listed above, represent the specific interests of particular ethnic groups.
Import duties , which ranged from 0 to 50 percent and averaged approximately 20 percent in 1997, are the most significant contributor to government tax revenue. Income tax on employment, in turn, is the second most important source of tax revenue, while taxation of business profits is the third most important. There are 5 income tax brackets, with the highest marginal tax rate set at 40 percent for monthly incomes above 3,301 birr, and the lowest marginal tax rate set at 10 percent for monthly incomes between 121 to 600 birr. The profits of incorporated businesses are taxed at a uniform rate of 35 percent. Excise taxes are also quite important, and the tax rates of many products, including pure alcohol (150 percent), perfumes and automobiles (100 percent), dishwashers (80 percent), and tobacco and tobacco products (75 percent), are set at exceptionally high rates. Since most of these items are luxury products, the high tax rates do not affect poor consumers. However some of the more essential commodities, such as petroleum and petroleum products (20 percent), are also taxed quite heavily. The government's total revenue stood at US$1 billion in 1996.