The five percent sales tax row between the government and the traders in Somalia’s largest open-air market has led to serious economic implications for the battered tax revenue collection system, the country’s finance ministry said Wednesday.
The talks between Ministry for Finance and the traders in Bakara Market collapsed last week following.
In a press conference on Wednesday, Finance minister, Abdirahman Duale Beileh said the tax collection campaign has been disrupted by the outrage of the traders who boycotted the levy.
“The dispute and caused by the sales tax has led the government to collect less revenue this month ( February), but we are planning to pay the salaries ( government workers), we have already signed much of the pay receipts,” said the minister.
In mid-February, traders in Bakara Market boycotted trade over the introduction of a 5% sales tax on all goods sold and services rendered. The traders have vowed to keep the market closed until the government eliminates the tax altogether. The local business community has reportedly refused to offload their goods from Mogadishu’s port in protest of the levy.
The decision to introduce the sales tax have pitted the cash-strapped Somali government against the business community who are pushing back against what they see as unfair taxation
Beileh pointed out that there was still hope for further negotiation between the sides.
He has maintained that taxes must be paid to enable the government to offer services.
” We are still in negotiation about this issue but every citizen and every business should pay the tax to the government or leave the country,” Beileh threatened.
Somalia was able to generate an extra $31 million in domestic revenue in 2017. Some of the extra funds were raised by collecting taxes from airlines and major telecommunications companies.
If Somalia can become self-sufficient, it may be able to receive international debt relief on the nearly $5.2 billion it owes to creditors.