When Purpose Meets Penalties, the Taxman Strikes Back

Jun 8 , 2025. By NAHOM AYELE ( FORTUNE STAFF WRITER )

In a fresh blow to the embattled Purpose Black S.C., the Ministry of Revenues has demanded over half a billion Birr in back taxes, penalties, and interest, intensifying the regulatory storm surrounding the company.

The tax authority's demand covers unpaid withholding and value-added taxes (VAT) accrued during the 2023 and 2024 fiscal years, further complicating an already volatile situation for the company, which was once celebrated for its promise of inclusive market access and community-based wealth building.

Ali Edris, tax investigation coordinator for the Ministry of Revenues, detailed Purpose Black’s liabilities and has begun probing the firm.

Founded by Fisseha Eshetu (MD), Purpose Black opened and operates a grocery chain branded "Ke Geberew," which is translated as "From the Farmer." But the company drew widespread attention for its unconventional equity mobilisation method.

Purpose Black had ambitious goals, notably planning to acquire a property from BGI-Ethiopia near Mexico Square in Addis Abeba for five billion Birr, to erect the 115-storey "Ke'Geberew Tower" in four years. The company claims it raised 1.5 billion Br from its initial share sale. A subsequent round, offering shares at 3.5 million Br each, promised similar housing-related benefits. The blended investment and real estate promise intrigued many, fueling public interest.

Yet, with nearly 1,750 buyers waiting and little to show for their investment, unease among shareholders mounted. Concerns among shareholders sharply escalated last August, when newly appointed CEO Ermias Birhanu (PhD) and three senior executives were arrested by the Addis Abeba Police Commission. Authorities accused the executives of involvement in questionable financial practices, sparking investigations by the Ministry of Justice and the Addis Abeba Police Commission.

Under increasing scrutiny, Fisseha left the country, claiming pressure and threats.

Purpose Black’s strategy to market shares bundled with homeownership promises drew the attention of investigators. They alleged fraudulent marketing and financial misuse. Sources close to the inquiry claim senior employees received commissions for registering buyers who believed they were acquiring homes rather than company shares.

Legal proceedings over these controversies remain ongoing.

The latest development is tax claims from the Ministry of Revenue, where auditors are demanding over 31 million Br in unpaid withholding taxes, including penalties and interest. Tax records indicate Purpose Black was required to remit 39 million Br in withholding taxes on goods and services transactions totalling 929 million Br in 2024. However, tax authorities claim that the company paid only 17 million Br, leaving an outstanding 21 million Br unsettled, as well as an additional 10 million Br in penalties and interest.

Purpose Black has contested the withholding tax claims. Yehualashet Tamiru, managing partner at Ethio Alliance Advocates, filed complaints with the Ministry’s Tax Appeal Committee, claiming that withholding taxes on goods procured directly from farmers should be exempted, arguing the company's social enterprise model.

“The company’s mission has always been to empower farmers and make essential goods more accessible to communities,” Yehualashet told Fortune. “Imposing withholding tax on such transactions undermines the very principle of inclusive market access.”

The Ministry has also placed a hefty demand on the company’s VAT obligations, asserting that Purpose Black owed it over 473.1 million Br, including penalties and interest. The Ministry claims taxable sales of approximately 2.825 billion Br by Purpose Black during the 2023 and 2024 fiscal years, incurring VAT of more than 423 million Br.

Purpose Black’s records disclose expenditures of 578 million Br for generating these sales, with VAT inputs totalling around 86.8 million Br. After offsetting input VAT against the output VAT, the remaining liability was computed at 336 million Br. Deducting prior VAT payments totalling 120.3 million Br, the Ministry concluded the outstanding VAT was 216.6 million Br. With accrued penalties and interest, this figure swelled beyond 473 million Br.

However, Purpose Black strongly contested these findings. According to Yehualashet, the company raised approximately 1.4 billion Br through share sales rather than direct housing sales. He argued that transactions related to share purchases should not incur VAT or interest charges associated with real estate transactions. The lawyer claims that Purpose Black never directly intended to sell apartments but to provide shareholders with potential housing benefits as part of their investment returns.

This position faces scepticism among tax experts. Dawit Kejela, a former auditor at the Ministry of Revenue and currently a private tax advisor, rejected the company’s argument outright.

“There is no tax regime under which share purchases entitle someone to a house,” Dawit told Fortune. “That is a sale, however you package it.”

Nonetheless, another legal perspective emerged from Daniel Fikadu, a legal advisor, who cautioned against premature tax obligations without clear evidence of ownership transfers.

“You can't tax for income when there is no written agreement transferring ownership,” Daniel argued.

He warned that government enforcement actions without addressing these nuances might scare investors, particularly those who made down payments believing they were buying property. Daniel also raised concerns about the priority of government claims over shareholders’ rights if the tax authority insists on collecting payments immediately.

“If the government collects the taxes, it will be first in line for any proceeds," he said. "That leaves shareholders in a weaker position to recover their investments.”

Dawit concurred that Purpose Black’s potential exemption from certain taxes might depend heavily on documented proof of transactions. If the company could demonstrate clear transfers from producers through traceable vouchers, the withholding tax obligation might be reconsidered.

“Tax liability depends on traceable and provable transactions,” said Dawit.

Officials of the Ministry of Revenue declined to comment, citing the ongoing investigations.

PUBLISHED ON Jun 08,2025 [ VOL 26 , NO 1311]