The federal government of Somalia faces challenges in revenue generation. This is because of the competition the government suffers by facing the other system of governance.
Their competition includes both traditional and religious competitors as well as other non-state actors – which collect their taxes and financial contribution. The competitor does this more efficiently and with accountability than the government, this is also due to the contentious process of negotiating a federal process.
Forms of government that receives tax payment in Somalia
Since tax payment does not result in the provision of services for citizens, trust in the tax system is poor. This renders Somalia’s revenue-generating officials stuck in a vicious circle, unable to provide public services.
The government is unable to hike taxes. Modern Somalia has three governing systems, each with its resource mobilization method.
First is tradition. The Somali system of kinship is at its root; the clan is the basic social unit, and social ties are governed by customary law (xeer). Through ‘qaaraan’, which means a communal or family contribution, resources are mobilized for community needs.
This system of administration is Islam-based. The citizen is required to pay zakat, one of Islam’s five pillars. It’s religiously endorsed.
In the modern nation-state, taxes are called ‘canshuur’, which means restriction or load. This is a forced system.
The three intersecting forms of government subject people to state and non-state taxes.
The Obstacles to Revenue Collection in Somalia
The federal government of Somalia faces challenges in the growth of revenue growth. To enhance the growth of revenue in the country, the federal government will be required to get the right laws and regulations; address cultural attitudes and resistance to the payment of tax; establish machinery for tax collection; and finally, put in place necessary political and constitutional settlement to allow serious domestic revenue mobilization.
It is important to note that the federal government is not the only revenue collection body in Somalia, as a result of that, they receive only a portion of domestic generated revenue. This is generated mostly from Mogadishu the capital because the reach of the federal government outside the capital city is limited. Other tax authorities collect tax or forms of financial or non-financial payment. This exists either formally or informally. There is a competition between the nationally recognized administration of the federal member states and the well-established but coercive authorities of al-Shabaab.
The Federal Member States
The federal state-building in Somalia is a work in progress; each state government collects customs revenue, which they keep for their use. The federal state generates revenue from the airports and functioning maritime ports.
Most of them set up a post at the border, and charge tariffs at their state borders. This creates a significant cost for business people moving goods.
Another significant source of fiscal source of revenue is Somalia’s natural resources, which include – petroleum, minerals, and fisheries; creating a relationship with the federal government and the member states.
Al-Shabaab
The federal government is not the only tax collector in the territory they nominally control. The al-Shabaab also often collects its taxes from large and small businesses remotely. They also collect taxes from travelers within the checkpoints that they control.
The al-Shabaab collect three types of revenue using coercion, which include the annual Zakat from the areas they control; it also forcibly collects donations (sadaqah) from the business community, and they collect ‘khidma’ (service) that is levied on commercial operation at a rate of 10% and on salaries at 5%. This revenue goes toward services, such as the al-Shabaab drought committee, they either give cash or provides food and clothing to drought-affected people.
