Addis Ababa – A new taxation order in Ethiopia is driving small business owners out of work and forcing families to close their shops, cafés, and small bars that operate under residential houses.
In many neighborhoods across Addis Ababa and other cities, families live in ordinary houses or villas with small shops built under them. These spaces, often converted into local groceries, cafés, or barbershops, have long been part of daily community life. They help house owners earn some extra income and give nearby residents easy access to everyday goods and services.
But over the past few months, that arrangement has turned into a national problem. Government tax officials have begun visiting these homes, telling owners they must reclassify their buildings as commercial properties because part of them is being used for business.
The moment a house is declared commercial, the owner faces a new annual tax — often as high as five million birr. For most ordinary homeowners, that figure is completely impossible to pay.
One homeowner in Addis Ababa told Horn Daily that local tax officers gave him a written notice to change his house status to commercial. He said the officials told him directly that if he refused, they would close the businesses operating under his house. “They say I must pay five million birr tax because of a small grocery renting my lower floor. I told them I cannot afford it. I built this house to live in, not to run a company.”
Another resident in the Yeka area said his property was inspected by officials who demanded the same thing. “They said you are using your house for business, so it is now a commercial building. But we are not rich people. We built our homes with loans. How can we pay such an amount?”
Because of the new rule, thousands of small business tenants — the café owners, tailors, and shopkeepers renting space in these houses — are being evicted. House owners are choosing to remove them rather than face tax bills they cannot afford. Many are now converting their lower floors back into private living rooms or storage spaces.
The result is devastating. In some streets, more than half the local shops have closed. People who once made a modest but stable income are now sitting idle, unsure what to do next.
A tailor in Gullele said his shop was his family’s only source of income. When the landlord received the new tax order, he was asked to leave immediately. He said he tried to find another place to rent but the commercial areas were too expensive. Now he is at home with no work.
A small restaurant owner in Addis Ababa said her business was also affected. “I was renting a small space in a family house. It was perfect for the neighborhood. When this new rule came, the owner said he can’t risk it. He asked me to leave. Now I have nothing.”
Economists say this policy shows how disconnected the tax system has become from people’s real living conditions. Ethiopia’s government, struggling with foreign debt and a shrinking budget, is trying to raise more revenue. But instead of targeting large companies, officials are turning to small community-based income sources.
Experts warn that the move will hurt both sides: homeowners lose the rental income that helps them pay bills, and small traders lose the space they depend on for survival.
The timing could not be worse. The cost of living in Ethiopia is already among the highest in Africa. Inflation officially stands near 13 percent, but the real cost of food, rent, and transport feels much higher. The birr continues to lose value against the dollar, pushing up the price of everything from cooking oil to construction materials.
For families who depend on these small ground-floor shops, the sudden tax orders feel like punishment. “We are not business people,” said one resident. “We are just trying to survive. Now we are told to pay millions or remove the small café that helps our neighborhood.”
Across Addis Ababa, the effects are visible. Once-busy corners where people gathered for tea or shopping are now quiet. Dozens of signs have been removed. Many small traders are unemployed, while families who relied on local service income are cutting expenses to stay afloat.
Some citizens believe the policy is being enforced too harshly and without proper planning. They say the government should have provided clear categories — distinguishing between full commercial properties and private homes that rent only small spaces. Others argue that officials are simply trying to meet revenue targets without caring about the human cost.
Economists interviewed by Horn Daily say the government’s approach could backfire. The loss of small businesses means fewer taxpaying citizens in the long term and less economic activity overall. One analyst described it as “a short-term collection strategy that destroys long-term growth.”
Residents and business owners alike are calling for the government to review the rule, set fair limits, and consider the realities of ordinary life. They say taxation should not punish people for being resourceful.
For now, however, more and more house owners are closing their small rental spaces, and more small entrepreneurs are losing their jobs. The quiet sound of daily life in Ethiopia’s neighborhoods — the buzz of barbers, the laughter in local cafés, and the chatter of small groceries — is slowly disappearing.
Ethiopia’s leaders face growing calls to find a balance between reform and survival. Until that happens, the government’s latest tax rule will continue to feel less like modernization and more like an attack on the small businesses that keep the country alive.
This report was prepared by Horn Daily’s editorial team in Addis Ababa through interviews with homeowners, small business operators, and local economists.