A widening rift has emerged between Addis Ababa’s tax authority and the country’s accounting and auditing professionals following allegations of large-scale tax underreporting, potentially setting a precedent in Ethiopia’s enforcement of financial accountability.
On April 1, 2025, the Addis Ababa Revenue Bureau released findings from a wide-ranging internal audit that scrutinized 36,729 tax files from the 2016 Ethiopian fiscal year. According to Bureau spokesperson Sewnet Ayele, the review revealed a staggering 10.6 billion birr shortfall in expected tax revenues—discrepancies the Bureau attributes to systematic underinvoicing, inflated expense claims, and profit margins deemed “abnormally low” compared to industry norms.
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The Bureau has identified 823 licensed auditors and accountants whose financial statements significantly diverged from its assessments. Among them, 334 professionals allegedly submitted records with over 75% discrepancies, while 490 showed gaps ranging between 25% and 75%. Only 39 accountants were commended for accuracy in their filings. In response, the Bureau referred the cases to the Accounting and Auditing Board of Ethiopia (AABE), the federal licensing body, requesting sanctions that may include written warnings and even license revocations under Tax Administration Proclamation No. 983/2008.
“Some auditors underreported taxes for every client they handled,” said Sewnet. “The unpaid differences have now been settled by the taxpayers themselves.”
This is the first time the Bureau has publicized such a sweeping enforcement initiative since the legal provision for auditor accountability was introduced nearly a decade ago.
The move has been met with swift and forceful backlash from professional associations. The Ethiopian Professional Association of Accountants & Auditors, Association of External Auditors, and Accounting Society of Ethiopia jointly condemned what they describe as a “slanderous campaign” that undermines professional credibility and presumes guilt without due process.
“Auditors work based on documents supplied by clients,” said Yohannes Negatu, President of the Ethiopian Accountants & Auditors Association. “If the Bureau suspects fraud, it should also investigate the taxpayer.”
The associations argue that the public release of the allegations—before the AABE concludes its investigation—violates principles of fairness and damages trust in financial reporting. They have demanded the immediate retraction of the Bureau’s statements from media platforms and called for urgent dialogue to defuse the growing tension.
Revenue Bureau officials remain adamant. Sewnet dismissed the need for formal talks with the associations unless they prove their legal registration and confirm that their members are AABE-certified.
“We have no legal obligation to engage with them,” Sewnet told Addis Fortune, emphasizing that the Bureau is acting within its mandate to safeguard public interest.
The Accounting and Auditing Board of Ethiopia (AABE), led by Acting Director General Fikadu Agonafer, acknowledged receipt of the case files and has launched an investigation. While stressing the Bureau’s right to report potential misconduct, the Board emphasized that final decisions rest with its disciplinary process, which may include criminal referrals if tax fraud is confirmed.
“The Bureau’s role is to report; ours is to decide,” said Fikadu.
Legal experts warn that AABE’s review could take months, particularly if the professionals contest the Bureau’s audit methods or file appeals. Ethiopia’s overburdened court system may further delay resolutions.
Beyond the legal and procedural aspects, the controversy casts a long shadow over Ethiopia’s financial reporting landscape. The auditing profession—already facing shortages of qualified personnel—fears reputational harm and a potential exodus of clients to foreign firms, which would deepen the country’s foreign exchange pressures.
Tax law expert Kaleb Wendu of Dilla University highlighted the fragile nature of voluntary compliance.
“Without trust, evasion becomes a survival tactic,” he warned, cautioning that aggressive crackdowns without dialogue may backfire.
Indeed, the incident unfolds at a time when the country is pushing major economic reforms, including capital market liberalization. Critics argue that undermining confidence in local auditors could erode investor trust just as Ethiopia seeks to deepen its financial infrastructure.
Despite the controversy, the Bureau has reported notable gains in tax collection. Over the first nine months of the fiscal year, revenues reached 160.9 billion birr, buoyed by a doubling of VAT registrants and a spike in registered income taxpayers. The Bureau also resolved 97% of the 12,561 taxpayer appeals filed this year, adjusting more than half based on the merits of the complaints.
Meanwhile, the Bureau is not exempt from scrutiny. Internally, 133 of its own employees and administrators face disciplinary actions or corruption charges—part of a broader drive to enhance tax transparency and credibility.
The fallout from this confrontation will likely shape Ethiopia’s tax enforcement and professional regulation for years to come. Experts and stakeholders alike are urging for a middle ground: one that balances enforcement with procedural fairness, and upholds trust in both public institutions and private professionals.
“Tax systems function on good faith,” said Kaleb. “Lose that, and enforcement costs rise for everyone.”
As the AABE conducts its inquiry and the accused await their fate, the broader question remains: Can Ethiopia build a robust, transparent financial system without alienating the very professionals needed to uphold it?
Source: Addis Fortune & Capital Ethiopia
