Corporate taxes, dahabshiil & cement

Recently, the new Somaliland finance minister Mr. Mohamed Hashi Elmi and his officials have been making forceful comments regarding the need for Somaliland´s wealthiest companies to start pay ing their fare share of taxes.

Mr.Hashi and his colleagues have stressed the need to institute auditing abilities and help streng then the current parliamentary acts on the law books.

The following is an except from Bloomberg;

(March 3,2011 (Bloomberg) -- Somaliland, the breakaway republic in northern Somalia, may double revenue collection this year as it enforces tax compliance among the country´s 40 biggest businesses and richest individuals, the Finance Ministry said.

The autonomous region expects government income to total $100 million this year, even after the government slashed tax rates and abolished other levies, Vice Finance Minister Warsame Said Abdi told reporters in the capital, Hargeisa, yesterday.

As of Jan. 1, payroll and sales taxes fell to 5 percent from 12 percent, while income taxes dropped to 10 percent from as much as 25 percent, Abdi said.

"Somaliland people aren´t tax-oriented," he said. "What they give to the government is seen as a loss. We are trying to educate them. We´ll use it to build schools, hospitals."

Revenue Loss

The loss of annual revenue from Telesom, the country´s biggest telecommunications operator, al one is about $25 million, because of authorities failing to enforce the domestic tax laws, according to Abdi.

"We haven´t had the capacity to do the auditing or enforce the existing laws," Mohamed said.

The government is counting on improved revenue collection this year to pay for a doubling of sal aries for civil servants, the police and military and a free primary-school education program intro duced at the start of the year, he said.)


So, how is one expected to interpret the news that Dahabshiil Financial Services, one of Somalilan d's 40 biggest business, has been, allegedly (according to certain reports from several Somaliland newspapers and online websites) awarded a license to build a new cement factory in Berbera as the result of a direct intervention from the highest office in the country?

Is the Somaliland government finally ending its attempt to reconstruct and rehabilitate the form er Berbera Cement factory? How can the Somaliland government consider awarding such a lucra tive project to a private company that is not paying its fair share of taxes?

Are the two issues mutual or exclusive? Is the government saying we will eventually get taxes, b ut in the meantime, we must encourage private enterprise?

This opinion page believes that it is against all forms of propriety and good governance to alleged ly award such a lucrative contract to an individual company without proper tender submissions a nd full disclosures. Even more, since Somaliland currently has a cement factory in need of reconst ruction and rehabilitation.

On the other hand, it is fair to argue that private enterprise must be encouraged and not  hinder ed. That presumably that new factory will provide employment to Somalilanders and will help to strengthen the nation´s economy. These are valid points which carry a lot weight.

Nevertheless, would it be too much ask for a full disclosure? How and when was this new license, allegedly awarded? Who were the other bidders? What were the criteria for selection? Was there a governmental panel to scrutinize the bids? Etc.

The new government came to power in Somaliland promising reforms and moral responsibilities. They have talked a good game, made some head way, but, sadly, so far, it seem they have been unable to resist resorting the old ways, "you scratch my back, and I will scratch yours", allegedly.