Addis Ababa Court Rules Against City's Roof and Wall Tax, Administration Defends Authority

Addis Ababa Court Rules Against City's Roof and Wall Tax, Administration Defends Authority

In a significant development, the Addis Ababa City Administration has found itself at odds with a court ruling that declared its "Roof and Wall Tax" implementation guideline as having "no legal basis." The city administration, however, has defended its position, asserting that it has the "appropriate authority" to enforce the tax.

Background of the Dispute

The controversy began when the Addis Ababa Finance Bureau introduced a new tax guideline targeting property owners in the city. The "Roof and Wall Tax" was designed to generate revenue by taxing buildings and houses based on their size and rental value. However, the guideline faced immediate backlash from residents and opposition parties, who argued that it lacked a legal foundation.

The opposition party, EPRDF, filed a lawsuit against the city administration, challenging the legality of the tax. The Federal High Court ruled in favor of the plaintiffs on January 9, 2017, stating that the tax guideline had "no legal basis" and should not be implemented.

City Administration's Response

Despite the court's ruling, the Addis Ababa City Administration has continued to defend its position. Mayor Adanech Abebe, in a recent statement, argued that the city administration has the authority to enforce the tax under existing laws. She stated, "If the court had always ruled correctly, there would be no disputes or appeals. However, the city administration has the appropriate authority."

The mayor also revealed that out of the 800,000 buildings and houses in Addis Ababa, only 120,000 are currently paying taxes. She described the situation as "unfair," noting that large buildings often avoid paying taxes, while smaller, less valuable properties are taxed.

Tax Calculation and Adjustments

Mayor Adanech explained that the tax rate per square meter has not changed, but the rental value of properties has increased significantly over the years. She stated, "In 1968, a property that rented for 10 Birr now rents for 300, 500, or even 1,000 Birr. The tax calculation is based on the current rental value, not the old one."

To address concerns about fairness, the city administration has adjusted the tax calculation method. For residential properties, the tax is now 50% of the current rental value, and for commercial properties, it is 75%. This means that if a building is currently rented for 1 million Birr, the tax will be calculated based on 750,000 Birr.

Legal Authority and Future Changes

The mayor referenced Proclamation No. 80/1968, Article 9, Sub-articles 1 and 2, which grants the city administration the authority to issue tax guidelines. She emphasized that the court's decision does not negate this authority and that the city administration will continue to enforce the tax until a new property-based tax law is introduced.

The mayor also mentioned that the current tax system will soon be replaced by a new property tax law, which is expected to address many of the existing issues. However, until the new law is implemented, the city administration will continue to collect taxes based on the current guidelines.

The dispute over the Roof and Wall Tax highlights the challenges of implementing tax policies in a rapidly growing city like Addis Ababa. While the court has ruled against the tax guideline, the city administration maintains that it has the legal authority to enforce it. The situation remains unresolved, with many residents caught between the court's decision and the city administration's insistence on tax collection.

As the city administration continues to collect taxes, it remains to be seen how the situation will evolve, especially with the anticipated introduction of a new property tax law. For now, the debate over the Roof and Wall Tax serves as a reminder of the complexities involved in urban governance and tax policy.