Apr 01, 2011

Somaliland: Plans to Enforce Compliance on Tax May Double Revenue

After drastic cuts in tax rates and enforced tax compliance among the biggest businesses the Somaliland authorities expect to increase revenues during the next year and be able to invest more in public health and education. 

Below is an article published by Bloomberg Businessweek:

Somaliland, the breakaway republic in northern Somalia, may double revenue collection this year as it enforces tax compliance among the country’s 40 biggest businesses and richest individuals, the Finance Ministry said.

The autonomous region expects government income to total $100 million this year, even after the government slashed tax rates and abolished other levies, Vice Finance Minister Warsame Said Abdi told reporters in the capital, Hargeisa, yesterday [March 30, 2011]. As of Jan. 1, payroll and sales taxes fell to 5 percent from 12 percent, while income taxes dropped to 10 percent from as much as 25 percent, Abdi said.

“Somaliland people aren’t tax-oriented,” he said. “What they give to the government is seen as a loss. We are trying to educate them. We’ll use it to build schools, hospitals.”

Somaliland, a former British colony, declared independence from Somalia in 1991 after the fall of dictator Mohammed Siad Barre. While no country has yet officially recognized its independence it has remained largely free of the clan warfare, kidnappings and assassinations that have plagued Somalia.

Somaliland’s government relies entirely on taxes for its budgetary expenses and is debt-free, Abdi said. Foreign assistance is not channeled through the government, he said.

The World Bank is helping to train tax officials and the United States’ aid agency this week agreed to build 10 state revenue centers across Somaliland, Hassan Jama Mohamed, the Finance Ministry’s public finance management coordinator, said in Hargeisa yesterday [March 30, 2011].

The loss of annual revenue from Telesom, the country’s biggest telecommunications operator, alone is about $25 million, because of authorities failing to enforce the domestic tax laws, according to Abdi.

“We haven’t had the capacity to do the auditing or enforce the existing laws,” Mohamed said.

The government is counting on improved revenue collection this year to pay for a doubling of salaries for civil servants, the police and military and a free primary-school education program introduced at the start of the year, he said.