Tax Bill Tests the Line Between Compliance, Fairness

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

A proposed tax legislation explicitly excludes all disputes involving suspected tax fraud, deliberate tax evasion, or constitutional conflicts from mediation. The bill to reform tax administration laws will officially move to a public hearing scheduled for next week. The upcoming public assembly will provide corporate stakeholders and legal experts with their first open forum to debate the highly contested evidentiary restrictions.

A revised tax administration law could bar taxpayers from submitting new evidence during complaints, appeals, or tax revision proceedings if the material was not provided during the initial assessment.

Where late evidence substantially changes liability, the taxpayer could face a penalty equal to one-fifth of the revised tax obligation. A draft amendment to the tax administration law has placed a contest at the centre of fiscal reform, determining how far the state should go to enforce compliance without eroding the procedural fairness on which tax administration depends.

The overhaul, recasting how taxpayers can challenge assessments, will be the first major revision of the law in nearly two decades. Federal officials see the bill as designed to strengthen compliance enforcement, align dispute rules with international practice and adjust the tax system to changing economic conditions. Much of the draft consolidates procedures that had previously been scattered across directives, internal practices, and administrative routines, turning long-used procedures into a single explicit legal architecture.

Officials present the bill as a move toward clarity. They say many rules were already in use, but had not been consolidated into a single law that clearly states procedures. Tax professionals have broadly welcomed that part of the legislation, hoping to see it clarify ambiguous provisions and gather fragmented rules that often governed disputes informally. The draft also establishes structured settlement procedures, including a formal process for resolving cases before they proceed to full litigation.

Under the proposal, a third-party mediator would facilitate talks between taxpayers and the tax authority. If a dispute arises after a taxpayer files an objection at the tax office but before it reaches the Tax Appeal Commission, the case may be referred to mediation, provided both sides consent. The tax authority would assign mediators, while taxpayers would cover the cost. Proceedings should be completed within two months, showing the bill author's preference for time-bound settlement.

The bill narrows that path by excluding cases involving suspected tax fraud or deliberate tax evasion. So would disputes in which a proposed settlement conflicts with the Constitution or tax laws. Mediation would also stop if either party refuses to participate.

Dawit Kejela, a former auditor at the Ministry of Revenue and now a private advisor, views the amendments favourably.

"The changes are in favour of taxpayers, which is a good thing,” he told Fortune.

But he questioned how mediation would work in practice. The draft does not clearly define who qualifies as a mediator, and Ethiopia lacks a formal tax advisory institution capable of assuming the role. Dawit also doubted the rationale for mediation itself, arguing that if the tax authority is already acting within the law, “it is unclear why a case should be referred back into a mediated process.” He warned that asking taxpayers to pay for mediation could raise concerns over impartiality.

He also questioned the power mediators would have, including who would decide whether an assessment was wrong and should be reduced. According to him, mediators may end up acting mainly as facilitators, encouraging taxpayers to settle with the tax office rather than move cases to the Tax Appeal Commission.

“If mediators are meant to convince taxpayers to settle their obligations with the tax authority, that makes sense," he said. "Otherwise, it would not be meaningful.”

The draft also introduces a conditional tax clearance certificate for taxpayers with outstanding liabilities. Taxpayers whose cases are in litigation, or who are repaying debts through instalment arrangements, could still obtain clearance certificates. This would allow them to renew business licences, participate in auctions and access bank loans, placing them close to the position of fully compliant taxpayers even when disputes or unpaid liabilities remain unresolved.

That relief is likely to matter for businesses trapped between tax disputes and administrative requirements. But other provisions are likely to draw sharper objections. The most contested remains the restriction on the admission of new evidence at later stages of dispute proceedings. The proposal prevents taxpayers from presenting documents in complaints, appeals, or revisions if the evidence was not submitted during the assessment. It also allows a fine equal to one-fifth of the revised obligation where late evidence materially changes the liability.

The bill also raises penalties for traders who fail to issue receipts. The fine would increase to 100,000 Br, twice the current level.

Daniel Fikadu, a veteran lawyer, found that parts of the reform could give taxpayers and businesses useful relief. But he criticised the size of some penalties, arguing that recent legislation has relied too heavily on “exaggerated and burdensome fines” imposed on citizens.

He was particularly critical of penalising taxpayers for producing valid documents after the assessment stage.

“If the document is legitimate, it should be encouraged rather than punished,” he said. "Punishing taxpayers only because evidence is submitted later weakens fairness in the tax system."

Efforts to obtain a comment from the Ministry of Finance were unsuccessful. Its officials disclosed that the bill will be presented at a public hearing scheduled for next week.

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