By Abdi Sheikh,
Hiiraan Xog, Feb 16, 2018:- (Reuters) – Ahmed Nur moves through the Somali capital of Mogadishu with a bodyguard of six men, a pistol in the waistband of his baggy trousers. He speaks of his work in whispers; seven of his colleagues have been killed in the last three years. But Nur is no intelligence operative. He’s a tax collector.
Now the central government’s imposition of a five percent sales tax last month, part of its efforts to win billions of dollars in international debt relief, have put him at the heart of a showdown with the country’s most powerful businessmen.
So far, the government’s efforts have been slowly working; domestic revenue was up to $141 million in 2017 from $110 million in 2016, said Finance Minister Abdirahman Duale Beileh.
But much more is needed before the government is self-sufficient, a key step toward accessing about $4.6 billion in international debt relief. The final amount is still being assessed.
Somalia has been wracked by civil war since 1991, and the cash-starved, U.N.-backed government in Mogadishu is desperate to claw in the revenue it needs to pay staff and provide services like security.
The military, which is supposed to fight al-Qaeda linked insurgents, is in tatters and a combination of corruption and cash shortages mean soldiers rarely receive their $100 per month paycheques.
“People ask for security services prior to paying tax. But the government cannot deliver the required services to the public unless tax is collected,” Nur confided to Reuters in a restaurant, glancing over his shoulder. “It is like the egg and chicken puzzle.”
Some progress was made last year: tax agreements have been reached with airlines and telecoms companies, and an income tax exemption for parliamentarians has been reversed.
“These are important measures and show the strong commitment of the authorities to reform,” said Mohamad Elhage, who leads the International Momentary Fund’s Somalia work.
Debt forgiveness would give the government access to credit that could be used to fund services, binding Somalia’s often quarrelling federal states closer together.
It could also wean the government off cash from donors such as Qatar and Saudi Arabia, which often have diverging agendas that can destabilise Somalia’s fragile politics.
“Increasing our revenue is a very important benchmark for the road map to clear the (debt) arrears,” said Beileh. “Our objective to cover our expenses is very important.”
Achieving that will depend, in part, on men like Nur.
TAX COLLECTION ON THE FRONTLINE
Somalia’s al Shabaab rebels are known for their ruthless efficiency at collecting tax and spy networks that track profits. Businessmen misstating their profits are likely to get a terse reminder to pay the difference or face a bullet; tax collectors who cheat the movement could be executed, a former al Shabaab enforcer told Reuters.
Al Shabaab were not available for comment.
As an agent of the U.N.-backed government, Nur cannot dole out amputations or executions. If a businessman refuses to pay up he can theoretically be arrested, if he has no powerful friends to protect him. But often, they will simply prevaricate, said Nur.
That’s what many businessmen are doing in the face of Somalia’s new tax. Mogadishu port has not unloaded a commercial vessel for nine days, port authorities told Reuters on Wednesday, as businessmen refuse to pay the new levy.
Trader Aden Abdullahi complained that he was already paying for port services and customs, and paying the Islamic tax of zakat to the poor. He can’t afford another five percent, he said.
“We see this idea as intentionally or unintentionally direct economic war on Mogadishu traders,” he said, shaking his head in disapproval in his wholesale grocery shop.
“The other problem is that the rebels tax us and I am sure they will also raise tax if the government raises tax.”
Some Somalis also say they are reluctant to pay up to an administration that many consider corrupt and inefficient. Almost all of Somalia’s budget goes on paying its politicians and civil servants; ordinary citizens see little being spent on improving public health, education or infrastructure in their bullet-scarred city.
“We pay various taxes by force. There is no beneficial return from the government. We do not even have roads and I have been paying these taxes at gunpoint for the last ten years,” 40-year-old minibus driver Hashi Abdulle said, referring to money extorted at government-controlled roadblocks.
But Minister Beileh says that criticism is outdated and citizens are confusing private extortion with public taxes. The government is putting reforms in place, he said, like trying to work out how to issue individual tax numbers and empowering the ministry of finance to take the lead on tax collection.
“People are used to dealing with … individuals, individual offices, individual soldiers, illegal tax collectors who did not belong to government,” he said.
“Changing that culture is also becoming a challenge … We are trying to close all the loopholes.”
(Additional reporting by Katharine Houreld; writing by Katharine Houreld; editing by Giles Elgood)