Somalia Should Pursue Tax Reform, World Bank Says

The World Bank has said Somalia needs income from a broader tax base to rebuild the country.

Domestic revenue (taxes plus fees) as a share of GDP remains very low in Somalia, at just 2.8 percent, making it difficult for the government to provide services, even though revenue mobilization has improved significantly over the past five years, the World Bank said.

Domestic revenue grew 36 percent in 2015, rising from about USD84m in 2014 to USD114.3m in 2015.

Revenue growth has been flat, declining 1.4 percent to USD112.7m in 2016. International trade taxes, mainly customs duty, remain Somalia’s key source of domestic revenue, accounting for 68 percent of its total in 2016, the World Bank said.

In its new economic update for the territory, the World Bank said “a narrow tax base and the absence of the legal and regulatory framework necessary to govern revenue collection and administration have created a tax gap of 70-80 percent.”

“A tax reform agenda – coupled with strengthened public finance management – could increase domestic revenue,” it recommended.

Global Tax News

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