Editorial: Wealthier together, poorer apart – (UM)

Somalia's central government finance minister along with federal member states finance ministers in Garowe- 27.09.2017 (Twitter photo)

Mogadishu (UM) -The meeting between the Somali Finance Minister’s chaired by the Federal Minister for Finance Dr. Abdirahman Beileh, in Garowe, yesterday ended successfully. It was agreed, for the first time since Somalia, adopted a Federal system of government, that taxes on khat, cigarettes and international departure are going to be harmonised. Furthermore, khat importers will have to register with the relevant Federal Member States they trade in for a license to operate. The agreement in Garowe, is the first and most important success in the Federalism discussions of the new administration, which on the same day as the agreement, dispatched Parliamentarians and Senators to Galmuduug, to calm the ongoing political tensions.

Before the agreed harmonisation between the Federal Government and the Federal Member States, taxes were collected at different tariffs by all Federal Member States on khat, cigarettes and international departures. At times, traders were taxed as they moved from one Federal member state’s territory to the other creating confusion and unnecessary further costs to consumers. This multiple taxation had a negative impact on the free movement of goods and services within Somalia by creating a customs barrier at almost every checkpoint between Federal Member States.

This is now supposedly to end with yesterday’s agreement in Garowe which is certainly a step in the right direction. However, the greater practical challenge of implementing fiscal federalism remains.
The harmonization of taxes on khat, cigarettes and international departures now needs to move from its paper-form to implementable reality on the ground with genuine benefits for all stakeholders, including, traders and customers.

The Federal Ministry of Finance needs to work closely with the regional finance ministries to share knowledge and bring forward equitable formulas for revenue sharing after collection. The Federal Member States must also recognise that they cannot be wholly reliant on the Federal Government whose main income is derived from Mogadishu Port and Airport.

It was clear from closing statement made by the Federal Member State’s Finance Minister’s that there remains ‘mistrust’ between themselves and the central government. There are suspicions that the latter favours one region over the other and provides them with more budgetary support.

However, Ummadda Media has obtained evidence that only South West State, Galmuduug and Hiirshabelle receive any direct fiscal transfers from the Central Government budget with the blessings of both Puntland and Jubbaland which have a stronger revenue base as a result of their ports.

Fiscal federalism is never going to be easy and it is tied into the wider constitutional and political federalism discussions which are currently stagnant. For the agreed tax harmonisation in Garowe, to work all the stakeholders must cooperate and act in good faith with the understanding that a fair revenue and resource sharing model can be born out of this very process in the near future. There must also a real effort at resource mapping across the country to determine the main national revenue sources and the national fiscal potential.

More crucially, those federal member states with the least resources must be supported by the central government and fellow federal member states with the broadest shoulders as Somalia is one nation and its people’s future are interdependent.–Somalis are wealthier together but poorer apart.