Data Error, Tax Freeze Push Ethiopian Fintechs to the Brink

A national bank accounting error, compounded by a tax authority that refused to correct course, has left licensed payment gateway operators fighting for survival just three years into the sector’s existence.

Ethiopia’s payment gateway operators (PGOs) spent three years building the software rails behind the country’s fastest-growing digital finance niche. They now face a fight for survival, not because the business failed, but because of a data error inside the National Bank of Ethiopia (NBE) and a tax authority that has refused to correct its position even after the central bank retracted the numbers.

Arifpay, Chapa, Santimpay and Kacha, the four PGOs licensed under NBE’s Payment Systems Operators directive, had their accounts frozen and hundreds of millions of birr forcibly withdrawn between May and June 2026, after the Ministry of Revenues (MoR) assessed tax bills based on transaction volumes the central bank itself later admitted were wrong by tens of billions of birr.

From Idle Licenses to Betting Rails

PGOs were licensed in 2020 as part of NBE’s push to modernize a cash-dominated economy, but for nearly two years the sector had enterprise-grade infrastructure and almost no transaction volume to process. That changed when the Addis Ababa Peace and Security Bureau shut down physical betting shops, pushing the sports gambling market online almost overnight. By 2025, online betting accounted for more than 99 percent of PGO processing volume, with operators earning a gross commission of roughly 2.5 percent per transaction, split 60/40 with telecom infrastructure providers.

A Tax Bill Built on Bad Data

The crisis originated in a routine data request. When MoR and the Ministry of Justice opened a sector-wide investigation in November 2025, they asked NBE for consolidated processing data covering 2021 through 2025. In compiling it, the central bank made two errors: it conflated gross transaction volume, the full amount passing through a PGO’s software, with actual company revenue, and its underlying figures were themselves miscounted.

For Arifpay, NBE’s summary recorded transaction volume of 143.9 billion birr against an actual figure closer to 32 billion birr, an overstatement of more than 111 billion birr. Chapa’s reported betting volume was later revised from 19.78 billion birr to 53.87 billion birr, and Santimpay’s figures were also corrected by billions. Applying a 30 percent corporate tax rate to gross transaction volume rather than commission income produced tax assessments wildly out of proportion to real earnings: MoR’s initial claim against Arifpay alone reached an estimated 43 billion birr, against an actual liability legal counsel for the firm puts in the range of 20 to 30 million birr.

Correction Without Consequence

NBE’s Banking Supervision Director formally notified MoR of the discrepancy in an April 2026 letter, and a central bank technical committee subsequently verified lower, corrected figures using backend data from the Information Network Security Agency, Ethio telecom, and Commercial Bank of Ethiopia merchant accounts.

MoR did not adjust its position. In May 2026, its Medium Taxpayers No. 2 Branch Office ordered commercial banks to freeze Arifpay’s accounts over a 818-million-birr assessment, then forcibly withdrew that amount directly from the firm’s accounts. Similar sweeps followed at Chapa and Santimpay. When the affected firms escalated to the Ministry of Justice, the ministry responded on June 2, 2026, that no administrative body could reverse an MoR decision, and directed the firms toward years of litigation at the Tax Appeal Commission or federal courts.

What It Signals for Investors

The episode sits awkwardly against the sector’s own tax record. Arifpay’s disclosed tax payments rose from 12 million birr in 2023/24 to 363 million birr the following year and nearly 400 million birr in 2025/26, and the firm had been publicly recognized as a model taxpayer months before the freeze. Industry sources note that officials involved in the account sweeps received promotions following the operations, a detail that has done little to reassure a sector already absorbing layoffs and, in some cases, weighing insolvency.

A parallel jurisdictional dispute has compounded the uncertainty. The National Lottery Administration (NLA) ordered banks in December 2025 to cut ties with betting platforms and PGOs over alleged under-reporting, despite lacking the technical capacity to independently verify transaction data. The Federal High Court of Lideta ruled against the NLA on June 22, 2026, finding that its revocation of licenses without a court order violated administrative law and property rights, and noting a conflict of interest in NLA acting as both regulator and a prospective competitor preparing its own online betting product.

For banking-sector observers, the case is a live test of regulatory predictability rather than a settled dispute. Industry participants point to two conditions for the sector’s recovery: judicial or Tax Appeal Commission enforcement of NBE’s reconciled figures, including the return of over-collected funds, and diversification of PGO revenue beyond betting into areas such as transaction processing for share sales under the emerging Ethiopian Capital Market Authority framework. Until the Tax Appeal Commission rules on the pending appeals, the outcome will shape how the wider investment community reads Ethiopia’s appetite for a rules-based digital finance sector.

Source data: The Reporter Ethiopia.