Thursday, June 20, 2024
NewsFlaws in roof, wall tax law embattles bar association, city admin

Flaws in roof, wall tax law embattles bar association, city admin

Ethiopia’s first federal bar association questioned the legal basis for Addis Ababa City Administration’s decision to impose a revised roof and wall tax. Its members are seeking answers from the administration pertaining to its authority to revise home valuations and implement steep increases to the longtime levy.

The administration, led by Mayor Adanech Abiebie, aims to generate up to six billion birr annually from the tax – a tenfold increase over current revenues that could help cover subsidy expenses.

The tax is separate from a proposed landmark property tax currently being developed by Ethiopia’s Finance Ministry, which would be the country’s first such tax.

The administration’s latest decision to impose the tax prompted the association’s response, as the increased funds would be collected from homeowners across the capital city.

In its letter to the city administration’s finance bureau, the association questioned the authorities’ claim that it was merely re-implementing a 50-year-old proclamation. Established in 2021, the Ethiopian Federal Advocates’ Association voiced concern and demanded an explanation for the bureau’s action.

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In a four-page letter dated September 29, 2023, the Association outlined flaws observed in the tax announcement that surprised many homeowners.

The Association issued the letter at the end of the previous week seeking clarification on the legal grounds for taxing roof and walls, given the administration’s stated justification of reusing an old proclamation in its efforts to generate significantly more tax revenue.

Ethiopia first introduced the roof and wall tax in 1976 through a proclamation that was later revised in 1979. For decades, the tax operated under this framework.

The proclamation stipulated that homeowners pay an annual percentage rate ranging from 1.5 percent to 4.5 percent based on their property’s estimated rental value.

Rental values were last updated in 1996.

Though the tax had been consistently levied since, Ethiopian homeowners rarely complained about the amounts owed. However, in April 2022, the city administration took steps to overhaul the system. 

The administration revised the estimated rental rates and increased the taxes due. Additionally, under new directives, rates were categorized based on building type—residential or commercial.

Specifically, the directives established rates ranging from 146 birr to 444 birr per square meter for properties like condominiums or commercial buildings.

Identifying four points for its investigation, the Association requested the Bureau to explain them. One of these points of focus clarified how the proclamation made the then Ministry of Labour and Houses the only responsible government body to estimate house rental value.

The letter then asks for an explanation of how a team of experts from the city administration managed to estimate house rental values in the city without any legal basis to be in charge of this task.

Up until the morning of October 6, 2023, the Bureau had not given any response to the Association.

Asked by The Reporter if the Association would not get any response or the city administration wouldn’t provide any solution, the Association’s president, Tewodros Getachew, said his office will keep pressing the administration through any means available, which could include taking it to court.

Veteran lawyers have also been expressing their discontent about the decision by the city administration. Among them is the legal scholar Tadesse Lencho (PhD), who is a managing partner at TBeST Law LLP and a lecturer at Addis Ababa University.

“This is completely illegal,” Tadesse told The Reporter two weeks ago. “They shouldn’t revise the rate or rental value without revising the law itself. The previous law was enacted at a different time and in a different context.”

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