A private hospital in Dire Dawa is threatened with a sudden closure due to a dispute over tax arrears claimed by the federal government.

The management of Bilal General Hospital says it is only days away from closing its doors and terminating services, unable to pay close to nine million Birr in income tax authorities claim remains unpaid. The amount includes penalties and interest on the principal tax, according to the Dire Dawa Branch Office of the Revenues & Customs Authority.

Opened in 2004, Bilal is one of the 15 health centres and 36 health posts operating in the eastern city. For a population of over 400,000, Dire Dawa has only one referral hospital and two general hospitals.

"The Hospital is near shut down due to the absence of uniform tax collection systems between the federal government and the City Branch Office," Nejah Abdulsemed, who co-founded the Hospital with her husband, Abdulselam Hussien (MD), told Fortune. "We've appealed to the authorities to reconsider their decision, but the Branch Office rejected our appeal even though Bilal Hospital has previously been awarded for being a dependable taxpayer."

The impasse with tax authorities came after they discovered in an audit that the Hospital failed to deduct 30pc in withholding tax from doctors and medical staff working on a part-time basis, instead it was transferring two percent over three years.

A law passed in 2013 obliges employers to deduct two percent from gross pay if part-time or contracted staff provided a tax identification number (TIN). Failure to provide a TIN subjects service providers to a 30pc deduction. However, the Hospital was told in December 2020 that it had to pay the full 30pc withholding tax for all its part-time employees for a two-year audit period beginning in 2017, whether or not the employees had provided tax identification numbers.

This goes against the federal tax proclamation passed in 2016, which does not differentiate between part-time and full-time employment, according to a tax law expert who wishes to remain anonymous.

Appeals made before the office of the City Mayor, the Health Bureau, the Revenues Office and the Diaspora Agency have produced no result, according to Nejah.