Lawyers Win Reprieve as VAT Battle Tests Limits Ministry's Mandate

Lawyers Win Reprieve as VAT Battle Tests Limits Ministry's Mandate

May 17 , 2026. By NAHOM AYELE ( FORTUNE STAFF WRITER )

The Federal Supreme Court’s Fourth Civil Bench issued an interim order on Friday, May 15, 2026, stopping a Ministry of Finance directive. The mandate requires legal professionals and service providers to register for value-added tax (VAT) regardless of income level. The Ministry has been granted 20 days to respond to the challenge. The dispute originated in November last year, when seven lawyers filed an initial suit, arguing before the Federal High Court that enforcing the directive without statutory thresholds would cause irreparable harm and violate the Constitution.

The Federal Supreme Court’s interim order late last week has turned a technical tax dispute into a confrontation over executive power and professional autonomy.

For now, the Court has stopped enforcement of a Ministry of Finance directive requiring legal professionals and other service providers to register for value-added tax (VAT) regardless of income level, shielding 190 lawyers.

The order, issued on Friday, May 15, 2026, by the Fourth Civil Bench, does not settle the legality of the directive. It freezes the application until an interlocutory order is issued, giving the Ministry 20 days to respond to the latest challenge. But its effect is larger than this particular case. Nearly 200 more practitioners are seeking similar protection through related cases, and hundreds of lawyers have turned the litigation into a test of whether the state can impose VAT obligations on professional service providers without observing statutory thresholds.

The dispute began modestly in November last year when seven lawyers - Mebtayehu Alehagn, Mewal Berhe, Thomas H. Michael, Mesfin Beyene, Roba Tsegaye, Hailu Hasena and Yonas Woldeyes - filed the initial suit at the Federal High Court. They appealed to a panel of three judges for a suspension of the directive, arguing that enforcement would cause “irreparable harm.” Their argument was not limited to the immediate cost of registration. They claimed the Ministry had no legal authority to issue the directive and that the measure violated the Constitution, VAT law and administrative procedures.

The lawyers also challenged the directive’s understanding of legal practice. They argued that it places an uneven financial burden on lawyers before the courts decide whether the directive itself is lawful. The Federal High Court initially granted only narrow relief, limiting suspension to the seven plaintiffs while the main case proceeded. That ruling protected the first challengers but left the rest of the profession exposed, prompting applications for similar interim protection.

More than 700 lawyers reportedly submitted petitions for relief. The wave transformed a focused legal challenge into a crowded procedural contest over who could be protected from enforcement while the courts reviewed the directive. The volume of cases put pressure on the judiciary and slowed the issuance of rulings on interim measures. Several applications were later dismissed by the Federal High Court on the ground that the directive had already entered into force, prompting disappointed applicants to appeal to the Federal Supreme Court.

The Ministry of Finance, too, moved to the appellate level. It appealed the first case, seeking to overturn the order protecting the seven lawyers. The Supreme Court upheld the lower court’s decision, keeping the initial suspension intact and giving other lawyers a stronger incentive to pursue the same route.

Before the Supreme Court, the Ministry's lawyers team represented by, Abraham Regassa, resisted the applications. He argued that suspension would serve little purpose because VAT is ultimately paid by clients who receive legal services, not by lawyers themselves. He argued that partial suspension would cut public revenue and undermine the broader public interest.

“The directive applies to many professional service providers, not only lawyers,” the Ministry argued. “The seven plaintiffs represent only a small fraction of those affected.”

The latest order came from a case brought by a lawyer, Legesse Fentaw. By granting interim suspension for 190 lawyers, the Fourth Civil Bench widened the protective shield beyond the initial seven and signalled that the Supreme Court is prepared, at least provisionally, to restrain enforcement while it examines the Ministry’s case.

Another group of around 200 lawyers has also reached the Supreme Court after the Federal High Court declined to grant an injunction. The Court has said it will review the file and hold a hearing to decide whether to issue a stay order.

At the Federal High Court’s Administrative Bench in Lideta District, on Chad St., the initial case remains pending. Oral arguments had been scheduled, but the Ministry sought postponement, arguing that the Court should first rule on how to manage roughly 30 similar files. The Bench granted a short adjournment, leaving the dispute suspended between tax collection, professional regulation and the Courts’ search for a coordinated path forward.

PUBLISHED ON May 17,2026 [ VOL 27 , NO 1359]