Fiscal Federalism Unwittingly Promotes Secession in Somalia

[Deeq A.]

Ahmed Gutale, the Auditor General of the Federal Republic of Somalia.

Garowe (PP Comment) —Puntland State of Somalia is rightly described as the promoter of the federal system in post-1991 Somalia. The formation of federal member states in Somalia since 2013 paved the way for the implementation of fiscal federalism. The cornerstone of this macroeconomic policy is to share information on how tax is collected and spent at the central government and federal member levels.

Bihi Egeh, the Somali Federal Finance Minister.

Fiscal federalism obliges federal member states to submit details about the different types of taxes authorities levy. The tax revenue disclosures from federal member states are kept online by the Federal Finance Ministry. In 2023, Hirshabelle, Jubaland, Southwest, Galmudug, and Banadir submitted the tax revenues collected during the 2022 fiscal year. Puntland, a founding federal member state, has not committed to disclosing its tax revenues. Disagreements between the Federal Government of Somalia and the Puntland State Government affect the exchange of public finance data.

Puntland Auditor General Osman Mohamud Ali.

In the Financial Governance Report 2023, the Financial Governance Committee urged Puntland to “be brought into the new framework so that its [fisheries] licensing arrangements are not conducted separately.” Puntland features in the report ten times, whereas Somaliland appears five times, all in reference to the illegal maritime Memorandum of Understanding signed by Somaliland Administration President Muse Bihi Abdi and the Prime Minister of Ethiopia Abiy Ahmed. The Somaliland Administration has representation in the federal institutions. The Finance Minister, Bihi Egeh, hails from areas controlled by the Somaliland Administration, but the report gives the impression that the Somaliland Administration is exempt from disclosing its tax revenues.

When President Bihi claims that previous agreements with the Federal Government of Somalia entitle the Somaliland Administration to lease a coastal district to Ethiopia, he is misinterpreting clauses in the agreement that presuppose common adherence to the imperatives of sovereignty. Although fiscal federalism provides opportunity for accountability, it creates schism and erodes institutional trust when applied selectively or halfheartedly. Puntland argument against tokenistic and divisive representation of Somaliland Administration in the federal institutions of Somalia has strong merits on the basis of the national interest.

© Puntland Post, 2024

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