A heated tax dispute is blossoming between authorities and six major investors in the floriculture sector. The conflict stems from an investigative tax audit of the Dutch family-owned business initiated two years ago, sparking uncertainty and legal battles within the industry.

At the centre of the storm is Desa Plants Plc, a subsidiary of Florensis, Europe's largest supplier of cut flowers with 13 million euros in revenues last year. A tax audit resulted in the rejection of 38pc of its expenditure. Subsequent audits of Red Fox Ethiopia Plc, Maranque Plants Plc, Asella Farm Plc, Klaver Farm Plc and Marginpar Farm Plc, had upto 55pc of their costs rejected by the Medium Tax Payers Branch Office.

The companies took the matter to Aynalem Nigusse, Minister of Revenues. While Desa Plants successfully appealed its case before the Federal Supreme Court's Cassation Bench last year, tax authorities have persisted in their claims against the other five, citing a lack of clarity in tax stipulations.

Desa primarily operates on a 15hct plot in eastern Shewa Zone, Oromia Regional State. General Manager Ronald Vijverberg recounts the challenging legal battle against tax authorities, emphasising the calculations only considered sales amounts without factoring in production costs. He claims that 41 million Br including interest and penalties was demanded.

He recalls the contentious tax debacle that he claims threatened the company's very existence as it was forced to kick start a legal battle. Justices Mulgeta Ayalew, Yosef Alemu, Desta Abate, Fasika Tamirat and Rediet Lemma of the Federal Supreme Court's Cassation Bench ruled in favour of the company in December last year.

"We took a gamble and won," said Ronald. Yet, the 50pc payments to appear before the tax appellate commission have not been returned.

However, officials from the Medium Tax Payer's Branch Office have not heeded the court's ruling. Deputy Head Sisay Gezu, suggests that there is a pervasive problem of underreporting tax liabilities in the industry, which requires a vigilant response from officials.

"We need to detect and deter non-compliance," he told Fortune.

Caught in the Ministry's ambitious plan to collect 440 billion Br in tax revenues this year – a 35 billion increment from the previous year – the floriculture businesses are facing heightened pressure. Profit margins are dwindling, with production costs exceeding revenues by five percent. This precarious situation is not unique to Desa Plants; it is a shared concern among major players in the industry.

One of the six companies caught in this tax turmoil is Assela Farm Plc. Last year, their tax declarations were rejected for "inflating the cost of freight expenses." The Company operates out of a 24hct farm in Welliso, Oromia Regional State.

Nestanet Mengistu, the finance head of Assela Farm, fears for her company's existence, pointing out that more than half of their costs are attributed to freight.

The novel nature of tax regulations in the industry and insights into floriculture's unique challenges have been noted by industry stakeholders.