Radar | May 27,2023
A legal battle over value-added tax (VAT) policy has placed the Ministry of Finance on the defensive after justices of the Federal Supreme Court rejected its appeal against a lower court’s injunction shielding seven lawyers from enforcement.
The ruling represents a notable procedural setback for the government’s controversial attempt to bring legal professionals under the VAT net regardless of income.
The Supreme Court’s Appellate Civil Division, in a ruling delivered by a three-judge panel, rejected the Ministry’s appeal, upholding an earlier Federal High Court ruling. The Supreme Court, comprising justices Mohamed Jibril, Misilal Tilahun, and Habte Tefera, ruled the High Court’s order applied strictly to the seven plaintiffs and was only a temporary measure as legal proceedings continued.
Citing the interim nature of the order, the Supreme Court declined to review the appeal, effectively leaving the lower court’s decision intact.
The dispute began after the Ministry of Finance issued a new directive requiring all legal professionals and service providers to register for VAT, regardless of their income level. Previously, an income threshold had exempted many from VAT registration. The directive, published on the Ministry’s website and filed with the Ministry of Justice, eliminated this exemption. Many lawyers objected, arguing that treating their profession like a commercial business would undermine their professional standing.
The Federal Bar Association, then led by Tewodros Getachew, responded by forming an 11-member committee to engage with the Ministry. Committee members threatened to pursue legal action if talks failed, but the Association ultimately chose not to become directly involved, citing its oversight role and a lack of mandate to represent individual members. After leadership passed to Tesfaye Derese, a veteran lawyer experienced in corporate, finance, and commercial law, the Association maintained its distance from the litigation.
However, seven lawyers - Mebtayehu Alehagn, Mewal Berhe, Thomas H. Michael, Mesfin Beyene, Roba Tsegaye, Hailu Hasena, and Yonas Woldeyes - decided to act independently. On November 6, 2025, they filed a lawsuit at the Federal High Court, seeking to suspend the directive on the grounds that "it would inflict irreparable harm." A three-judge panel heard their case.
The plaintiffs argued that the Ministry "lacked the legal authority to issue the directive and that it violated the Constitution, VAT law, and administrative procedures." They appealed, urging that the directive be suspended until a final ruling and requesting an urgent injunction given its official registration and online publication. The lawyers warned that enforcement would hurt them and hinder their legal challenge.
The Finance Ministry, represented by Abraham Rega, countered that the directive was already in effect and that suspending it would not benefit the plaintiffs. The defendant argued that VAT is paid by clients, not by lawyers, and that suspension could reduce government revenue and "could damage the public interest." Officials also noted that the directive applies to other professional service providers, with the seven plaintiffs representing only a fraction of those affected. The Ministry portrayed the measure as part of a transition from a turnover tax system to VAT, a move they said was crucial for improved tax administration.
The Federal High Court ruled in favour of the plaintiffs but limited the scope of its ruling. The directive was suspended only for the seven individuals who filed the case, and only until a final judgment is made. The judges cautioned that extending the suspension to all legal professionals could cause a "significant loss of government revenue."
Unhappy with the ruling, the Ministry's lawyers appealed to the Supreme Court, arguing that the High Court erred in suspending a directive already in force. The defendant claimed "the High Court failed to consider the potential losses lawyers would face under the directive" and appealed to the Supreme Court to dismiss the lower court’s decision.
The Justices, with one dissent, rejected the appeal. They found the High Court’s temporary restraining order was not a final judgment and thus could not be reviewed. According to Justice Mohamed, the first on the panel, the Court should have reviewed the Ministry’s appeal.
The main lawsuit filed by the seven lawyers continues in the Federal High Court, with oral arguments scheduled. As the proceedings progressed, the case attracted the support of more than 100 additional lawyers, who formally joined the suit to halt the enforcement of the VAT directive on legal services. The wave of support has encouraged other lawyers to file similar cases, each attempting to block the directive.
PUBLISHED ON
Jan 31,2026 [ VOL
26 , NO
1344]
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