The Somali Federal Government Introduces VAT

[Deeq A.]

Egeh: ”The Finance Ministry now has a system to track sales made by businesses. The VAT is 5% of sales, which is comparatively far less than the VAT levied in our neighbouring countries.”

Mogadishu (PP News Desk) — The Finance Minister of the Somali Federal Government, Mr. Bihi Iman Egeh, yesterday declared the introduction of a value-added tax on sales made via mobile phones, money wallets and at point of sale systems. “The Finance Ministry now has a system to track sales made by businesses. The VAT is 5% of sales, which is comparatively far less than the VAT levied in our neighbouring countries” said Egeh. The new VAT system will take effect in Mogadishu, and is expected to be rolled out in other parts of Somalia.

The introduction of VAT could trigger inflation if traders pass the VAT charges on to buyers. The Directorate of Revenues of the Finance Ministry disseminated advertisements in Somali about the VAT. “Citizens, pay the tax. When you make a purchase, the VAT will directly go to the government’s account,” says the television advertisement. It is unclear if the price is inclusive of VAT or if the buyer will pay an extra 5% of the price as a VAT.

The Directorate of Revenues advertisement in Somali.

“The customers will be burdened with an additional transaction if the merchant asks them to cover the VAT charges to a government account in a separate transaction. Normally, the VAT is included in the price,” said an accountant in Mogadishu.

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