Tax Dispute: Court Rules Against Addis Ababa's "Roof and Wall Tax," City Administration Pushes Back

Tax Dispute: Court Rules Against Addis Ababa's "Roof and Wall Tax," City Administration Pushes Back

A heated legal and administrative battle has erupted in Ethiopia's capital. The Federal High Court recently ruled that the Addis Ababa City Administration's controversial "Roof and Wall Tax" guideline lacks a legal basis. However, in a bold countermove, the City Administration has refused to back down, asserting its executive authority to collect taxes under existing proclamations. This standoff leaves property owners in a state of uncertainty.

Why the Court Intervened

The controversy began when the Addis Ababa Finance Bureau introduced a new directive to tax buildings based on their updated rental value. Opposition parties and residents challenged this, arguing it was an overreach without proper legislative backing. The court sided with the plaintiffs, stating the specific guideline used for implementation had "no legal basis."

The Administration's Argument: "Fairness and Authority"

Mayor Adanech Abebe has strongly defended the tax, arguing that the court's decision does not strip the administration of its authority. She highlighted a massive disparity in the tax system: "It is unfair that large buildings avoid taxes while smaller properties pay," she stated. The administration revealed that nearly 85% of properties in the city are currently untaxed or under-taxed.

The Inflation Factor:
The Mayor pointed out the absurdity of using old data. "In 1968, a property rented for 10 Birr; today it rents for 1,000 Birr." The administration argues that they are not changing the tax rate, but simply applying the existing rate to the current market value of the property.

The New Calculation Method

To address complaints about the sudden spike in tax assessments, the city has introduced adjusted formulas:

• Residential Properties: Tax is calculated on 50% of the current rental value.
• Commercial Properties: Tax is calculated on 75% of the current rental value.

Example: If a commercial building generates 1 Million Birr in rent, the tax will be assessed based on 750,000 Birr, rather than the full amount.

What Comes Next?

The standoff continues. While the administration claims it will continue enforcement until a new, comprehensive Property Tax Law is enacted, the court ruling provides legal ammunition for residents refusing to pay. This situation highlights the complexities of urban governance in a rapidly developing city like Addis Ababa, where infrastructure demands often outpace legislative frameworks.