Commerce in Somalia was interrupted for a second day on Monday as traders protested the collection of a 5% sales tax in the government’s efforts to become self sufficient by increasing domestic revenue.
On August 18, Somalia started collecting the levy on goods and services through mobile money transactions, which form the bulk trade in Somalia. The move comes as President Hassan Sheikh Mohamud’s administration tries to rebuild an economy decimated by more than three decades of civil war and opposition from al-Shabaab, a group linked to Al Qaeda.
The protests led to the shutdown of some stores in Bakara, the largest market in the capital, Mogadishu. Somalia’s fledgling government relies on taxes from the city’s business community to fund its spending priorities as it has no means of collecting levies from other regions. It also depends on African Union troops to maintain peace in areas it controls outside the capital.
"The strike will continue until the government addresses our concerns by either reducing or completely withdrawing the tax,” said Mohamed Hassan, a store owner in the Bakara market.
Somalia secured a $100 million extended credit facility from the International Monetary Fund in December and one of the priorities in the program include development of a new income tax law and boosting revenue collection.
The war-torn nation also reached an agreement to cancel $4.5 billion in debt with international lenders late last year. Under the deal, its external obligations were forecast to fall below 6% of gross domestic product by the end of 2023, from 42% previously, according to the IMF and World Bank.
