Enhanced Tax Collection Strategies Drive Increased Government Revenue in Somalia

[Deeq A.]

The Somali Finance Ministry notified drivers to register their vehicles to be able to pay road tax.

Mogadishu (PP Report) — One of the remarkable milestones that the incumbent Federal Government of Somalia keeps quiet about is its tax collection capabilities in Mogadishu. The Somali Federal Finance Ministry has employed revenue protection officers to collect information about rents in different parts of Mogadishu. This strategy enables tax collectors to enforce what President Hassan Sheikh Mohamud stated at the Villa Somalia Mosque several months ago: “The government will use the police and intelligence service to collect tax,” President Mohamud said.

Tax revenue protection officers concentrate their efforts on the Bakara Market, which is now located in three districts: Hawlwadaag, Hodan and Wardhiigley (Warta Nabadda). Landlords who withhold accurate information about the rent income or the number of tenants face sanctions in the form of excessive fines or arrest. Reluctance to pay tax is attributed to a lack of understanding about the importance of tax on the part of citizens and less confidence in the integrity of federal government institutions to use tax revenues judiciously.

The Revenue Directorate of the Somali Federal Finance Ministry oversees tax collection in Mogadishu.

Other sources of federal tax revenue include traders and merchants whom authorities compel to pay tax on profits they make, in addition to the value-added tax on certain goods and services that traders and merchants are required to charge. Ali (not his real name), an experienced accountant who has assisted several businesses in Mogadishu with their annual audits, criticised the federal Finance Ministry for its arbitrary approach to forcing businesses to pay their tax liabilities without proper consideration of business performance. “The Finance Ministry expects a food store owner to pay sales tax even when the business had made losses,” said the accountant.

At a recent event in Mogadishu, the Mayor, Yusuf Hussein Jimale, urged the three newly formed Mogadishu districts to collect taxes to fund the maintenance of security and the administration of justice. The Somali Federal Finance Ministry opened offices within each district commissioner’s premises to oversee tax collection in the districts.

A person familiar with the plans of the Finance Ministry told Puntland Post that the Finance Ministry intends to take over the ex-Revenue Ministry’s offices near the district commissioners’ offices in Mogadishu. In 1986, the ex-Revenue Ministry initiated a tax collection scheme. Districts’ income will probably increase due to other sources of tax revenue such as business license tax, transfer taxes and construction tax. The banning of cars without plate numbers in Mogadishu is expected to create a new source of tax revenue for the Banadir Regional Authority, enabling the introduction of road tax and mandatory car insurance.

Mogadishu is leading the way in tax collection and may even subsidise other regions. “Our salaries are paid for by Mogadishu taxpayers. We must ensure Mogadishu attains federal status,” said Sadia Yasin Samatar, the First Deputy Speaker of the Federal Parliament of Somalia.

© Puntland Post, 2024

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