Judges Reject Bid by Lawyers to Freeze Controversial VAT Directive

Judges Reject Bid by Lawyers to Freeze Controversial VAT Directive

Feb 21 , 2026. By NAHOM AYELE ( FORTUNE STAFF WRITER )

In a dispute that has spread through the legal profession, 89 lawyers have failed to persuade the Federal High Court to suspend a tax directive that compels legal professionals and other service providers to register for value-added tax within one month of approval, regardless of income level. The ruling leaves the directive fully enforceable against the newly joined applicants, even as seven earlier plaintiffs remain temporarily shielded from enforcement while the court weighs the measure's legality.

A legal battle over who should register for value-added tax (VAT) has widened inside the legal profession, but it is tightening in court.

A bid by 89 lawyers to stop a tax directive that compels legal professionals and other service providers to register for VAT regardless of income level has been rejected by the Federal High Court. The ruling leaves the directive in force against the newly joined applicants, even as seven earlier plaintiffs remain temporarily shielded from its enforcement.

The dispute followed the Ministry of Finance’s shift from the turnover tax regime to VAT for professional services. Lawyers and other service providers are compelled to register within one month of their approval. The Ministry casts this as routine tax administration that should apply consistently. The challengers claim it is a legal overreach that forces VAT registration regardless of earnings.

The case began on November 6, 2025, when seven lawyers (Mebtayehu Alehagn, Mewal Berhe, Thomas H. Michael, Mesfin Beyene, Roba Tsegaye, Hailu Hasena and Yonas Woldeyes) filed suit at the Federal High Court. They appealed before a three-judge panel to suspend the directive, arguing that enforcement would cause “irreparable harm.” They also argued that the Ministry lacked legal authority to issue the directive, that it violates the Constitution, the VAT law and administrative procedures, and that enforcement should be halted until the court rules on legality.

The Ministry's legal team, led by Abraham Rega, opposed the appeal, arguing that the directive was already in force. Suspending it, the Ministry's lawyer claims, would not benefit the plaintiffs because VAT is paid by clients who receive legal services, not by the lawyers who provide them. It warned that suspending the directive, even for a limited group, would reduce government revenue and conflict with the wider public interest.

"The directive applies to many professional service providers, not only lawyers," said the defendant. "The seven plaintiffs represented only a small portion of those affected."

The Federal High Court, nonetheless, ordered that enforcement be suspended for the seven initial plaintiffs until a final judgment is issued, while leaving the directive in place for everyone else. The injunction created a narrow exception within a policy the government insisted should operate uniformly, without settling the underlying legality dispute.

The Ministry appealed to the Federal Supreme Court. It argued that the High Court had erred by suspending a directive that was already being implemented and had failed to weigh the consequences. The Supreme Court rejected the appeal, finding that the High Court’s temporary injunction was not a final judgment and therefore could not be reviewed at that stage.

That denial encouraged other lawyers to seek similar relief by intervening in the ongoing case. The intervening applicants organised themselves in clusters, including 57 lawyers under Thomas Berhane, 19 under Mulu Tesfa, four under Tsegaye Tesfaye, five under Mantegbosh Ayele, and others, including Mezimur Tenker and Sisay Eshetu, bringing the total to 89. They petitioned that the directive also be suspended in their favour until the High Court issues a final decision on the merits.

The Ministry opposed their request and called it "an attempt to win, through interim orders," what should be decided at the end of the case.

"Administrative directives remain valid and enforceable unless and until a court formally revokes them," said the Ministry's lawyer. "Actions taken under them continue to have effect even if a directive is later struck down. Staying enforcement for a new group would ignore legislative intent and invite selective compliance."

The lawyers warned that if filing a case could suspend enforcement, parties would be tempted to litigate as a delay tactic rather than a test of legality. Judicial review, they said, would risk becoming a tool of obstruction that disadvantages those who comply. The Ministry’s legal team, including Havana Hordofa and Abraham Rega, argued that frequent temporary injunctions weaken stability and predictability in administrative law and erode public confidence, particularly in taxation and public finance, where consistent application is central to policy.

The newly joined plaintiffs repeated the core argument made by the initial seven. They claimed that continued enforcement would cause them “irreparable harm.” They sought the same interim protection while the underlying challenge moves through the courts.

A three-judge panel again heard the matter. By a majority, Judges Yesuf Mohamed and Zenebe Gebrehiwot rejected the application. Their reasoning turned on timing written into the directive itself. Lawyers were required to register within one month of its approval. That period had passed, and the directive had already begun to be enforced against the applicants. In those circumstances, the Judges held, suspending enforcement now would not operate retroactively and could not undo obligations that had already taken effect.

Judge Kedir Idris dissented, arguing that the directive should be suspended for the newly joined plaintiffs if they were prepared to deposit a financial guarantee to cover any potential liability should they ultimately lose the case. His view did not carry the day, and the request was denied by majority vote.

With their attempt at temporary relief blocked, the 89 lawyers have signalled they plan to take the matter to the Federal Supreme Court.

Outside the courtroom, the directive continues to shape daily compliance practices for lawyers and other service providers, even as the High Court has yet to rule on validity.

PUBLISHED ON Feb 21,2026 [ VOL 26 , NO 1347]