Dr Abdillahi Hashi Abib (MP), Author at Kaab TV

Appeal for the Protection and Support of Somali Businesswomen

Dr Abdillahi Hashi Abib (MP) — Sun, 25 Aug 2024 14:48:28 +0000

I write to you today, not just as an observer, but as a voice for the Somali businesswomen in Mogadishu who have, for years, turned to selling Qat as a means of survival and sustenance. These women, who have shouldered the heavy burden of providing for their families, are now being pushed to the brink by an unjust and unconscionable tax policy. With a deep sense of anger and compassion, I must express the overwhelming injustice that these women are facing.

For decades, these women have fought against all odds, contributing to the economic backbone of Somalia despite the many obstacles that have stood in their way. But what they are facing now is not just another challenge; it is a direct assault on their ability to live with dignity.

The sudden and steep increase in taxes on Qat, now ranging from $6 to $8 per bundle, is nothing short of economic strangulation. It is an act that reeks of contempt for the very people who have kept the wheels of commerce turning, even in the darkest of times. This tax hike is not just a policy; it is a weapon being used to crush the hopes and dreams of countless Somali women who have struggled to make an honest living. The audacity of imposing such a burden on these women, who are already on the margins of society, shows a complete disregard for their humanity. It reveals a government that is out of touch with the realities of its people, a government that is willing to sacrifice the most vulnerable in its pursuit of revenue.

The economic reasoning behind such a tax hike is not only flawed but also morally bankrupt. The government claims that it needs to increase revenue, but at what cost? At the cost of driving these women into destitution? At the cost of pushing families deeper into poverty? This is not economic development; this is economic destruction. It is a policy that fails to understand the basic principles of taxation, which should be fair and proportional, not punitive and crippling.

I must express my profound concern over the highly troubling reports regarding the handling of tax revenues collected from Qat sales. There is substantial and credible evidence to suggest that a significant portion of these funds, specifically ranging from $4 to $6 per bundle, is being illicitly diverted away from the Treasury Single Account (TSA), in blatant contravention of the Public Financial Management (PFM) Act of 2019.

The evidence emerging from the Central Bank’s TSA records for the fiscal years 2022 and 2023 raises alarming questions about the compliance of relevant authorities with this statutory requirement. The daily deposits recorded in the TSA for this period amount to only $47,500. Given the volume of Qat sales and the corresponding tax revenues that should be generated, this figure is woefully inadequate and suggests that a substantial portion of the revenue is being siphoned off before it reaches the TSA. Such a discrepancy points to a systematic and deliberate effort to misappropriate public funds, in direct violation of the PFM Act.

The implications of this alleged misappropriation are far-reaching and deeply concerning. Not only does it represent a gross misuse of public resources, but it also erodes public trust in the government’s ability to manage the nation’s finances. The diversion of these funds, if proven true, constitutes a serious breach of public trust and a potential act of corruption, which could have severe legal ramifications for those involved. The alleged diversion of these funds into the hands of individuals with close ties to Villa Somalia or other government officials constitutes a flagrant breach of the law. Such actions directly contravene the principles enshrined in the PFM Act, which mandates transparency, accountability, and the proper management of public finances.

The legal ramifications of this situation are profound. Under Somali law, corruption is a criminal offense that carries severe penalties, including imprisonment and fines. Furthermore, the diversion of public funds for private gain constitutes a violation of international anti-corruption standards, to which Somalia is a party.

These standards, established by instruments such as the United Nations Convention against Corruption (UNCAC), require states to implement robust measures to prevent, investigate, and prosecute corruption and to recover stolen assets. The situation has reached a critical juncture, prompting the courageous businesswomen who have long strived to earn an honest income under increasingly challenging conditions to urgently call upon the highest offices in the land—the President and Prime Minister—for immediate intervention. Faced with an unsustainable tax burden that threatens their very livelihoods, these women are now seeking either a substantial reduction in the taxes imposed on their businesses or the implementation of a total ban on Qat sales as a last resort to alleviate their suffering.

These women are not asking for special favors; they are demanding fairness and justice. They have seen precedents where the government, under the leadership of the President, intervened decisively in matters affecting the livelihoods of vulnerable groups, such as the intervention in the case of the Bajaj drivers. They rightfully expect the same level of attention and action in their case. Their businesses are not just about making a living; they are about supporting families, contributing to the local economy, and striving for a better future in a nation that has seen too much hardship.

These businesswomen are not only asserting their economic rights but also invoking their constitutional rights. The Constitution of Somalia guarantees the right to assemble and express grievances publicly—a fundamental democratic right that these women are prepared to exercise if their pleas continue to fall on deaf ears. This right is enshrined in Article 16 of the Provisional Constitution, which protects the freedom of assembly and the right to demonstrate peacefully. It is a powerful reminder that these women, though marginalized economically, are empowered by the law to demand that their voices be heard.

If the government fails to address these legitimate concerns, it risks not only deepening the economic hardship faced by these women but also igniting social unrest. The right to protest is a legal and constitutional safeguard against government inaction or overreach. These women are fully within their rights to organize and protest if their demands for economic justice are ignored. Such action would be a lawful and justified response to a situation that has become untenable due to the government’s failure to act in the best interests of its citizens. The gravity of these allegations, it is incumbent upon us to act with the utmost urgency and diligence. I therefore respectfully urge my esteemed colleagues in the Finance and Commerce Committees to immediately summon the Minister of Finance and the Minister of Commerce to address these critical issues.

The allegations of illegal taxation being imposed on Somali businesses are not only deeply concerning but represent a serious breach of legal and constitutional principles. It is essential that we take swift and decisive action to put an end to the imposition of taxes that have not been lawfully approved by the Parliament of the Federal Republic of Somalia.

The imposition of unauthorized taxes is not merely an administrative oversight; it is a direct violation of the constitutional mandate that governs the collection and allocation of public funds. Article 123 of the Provisional Constitution of Somalia explicitly vests the power to impose and approve taxes in the legislative branch, requiring that all taxation be authorized by the Parliament. Any taxes levied without parliamentary approval are, by definition, illegal and constitute a serious breach of the rule of law. This usurpation of parliamentary authority undermines the very foundation of our democratic system and threatens the integrity of public financial management in Somalia.

As representatives of the Somali people, we have a solemn duty to ensure that the funds contributed by our citizens through taxes are safeguarded and used for the public good. The principles of transparency, accountability, and responsible financial management must be always upheld. When public funds are misappropriated, or when illegal taxes are imposed, the trust between the government and its citizens is severely eroded. This breach of trust has profound implications for social cohesion, governance, and the overall stability of our nation. This is a matter of the utmost urgency and importance. The credibility of our government and the trust of the Somali people are at stake. We cannot, in good conscience, ask our citizens to contribute to the national treasury if we cannot guarantee that their contributions will be managed lawfully and used for the public good. The Parliament must exercise its oversight functions rigorously to ensure that the rule of law is upheld and that the economic interests of the Somali people are protected. We owe it to our constituents to act decisively and ensure that justice prevails in this critical matter.

I trust that you will give this matter the attention it deserves and take the necessary steps to address the concerns of these hardworking Somali businesswomen.

Dr. Abdullahi Hashi Abib is a Member of Somali Federal Parliament.

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A Misguided Tax Policy: The Threat to Somalia’s Small Businesses and Economy

Dr Abdillahi Hashi Abib (MP) — Sat, 17 Aug 2024 20:02:08 +0000

The President of Somalia, in defending the decision to impose a 5% tax on all digital transactions through merchants’ accounts, is either grossly misinformed or deliberately ignoring the catastrophic economic consequences of such a policy. This is the price you pay when you appoint individuals lacking education and experience to lead the Ministry of Finance. This is not merely a misguided tax; it is an economic dagger aimed directly at the heart of small businesses and the working poor of Somalia.

Small businesses and informal traders are the backbone of Somalia’s economy. These individuals, with limited resources, engage in activities such as selling goods at local markets, running small kiosks, or offering basic services like transportation and food vending. Unlike large corporations, these small businesses do not have the luxury of passing on costs to customers without significant repercussions.

The 5% tax is flat, meaning both small and large businesses are required to pay the same percentage on their digital transactions. This might seem fair on paper, but in practice, it is anything but. For a large corporation with high revenues, a 5% tax on digital transactions is a manageable expense, one that can be absorbed or passed on to consumers with minimal impact on overall profitability.

However, for a small business owner whose daily earnings might barely cover basic needs, a 5% tax on every transaction is devastating. It cuts directly into the already narrow profit margins that sustain their livelihood.

Faced with this new tax burden, small businesses will be forced to raise prices to compensate, making basic goods and services more expensive for consumers. In an economy where most people are already struggling with low incomes and high living costs, even a small price increase can significantly reduce consumer spending. As demand decreases, businesses will struggle to stay afloat, leading to closures and job losses.

The Somali economy desperately needs the energy and innovation of small entrepreneurs to grow. However, this tax discourages entrepreneurship by making it even harder for small businesses to survive, let alone thrive. The barriers to entry for new businesses will rise as potential entrepreneurs are deterred by the punitive costs of digital transactions, a critical aspect of modern business operations.

One of the key advantages of digital transactions is that they offer financial inclusion for those traditionally excluded from the formal banking sector. By taxing these transactions, the government is effectively discouraging the use of digital financial services, pushing people back into cash-based transactions that are less secure, less efficient, and less transparent. This regressive policy will hinder progress in expanding financial access to the broader population, particularly in rural areas where banking infrastructure is scarce.

Somalia has made significant strides in developing a digital economy, with mobile money services becoming a critical part of daily life. This tax, however, threatens to reverse those gains by making digital transactions less attractive to both consumers and businesses. If digital transactions decrease, the entire ecosystem—from telecom operators to fintech companies—will suffer, slowing down the pace of technological adoption and innovation in the country.

The President’s defense of this policy suggests a fundamental misunderstanding of its implications. The current Minister of Finance has likely misled the President into believing that this tax is a necessary revenue-generating measure without considering its broader economic impacts. While it is true that Somalia needs to expand its tax base and improve revenue collection, this cannot be done on the backs of the poor and small businesses.

What the Minister of Finance fails to grasp—or perhaps conveniently ignores—is that sustainable economic growth requires a supportive environment for small businesses, not one that suffocates them with burdensome taxes. By presenting this tax as a one-size-fits-all solution, the Minister is disregarding the stark differences in capacity between small businesses and large corporations, leading the President down a path that could have severe consequences for Somalia’s economy and social fabric.

This tax is not only unjust and economically harmful but also undermines the very foundation of Somalia’s nascent digital economy. It must be repealed immediately to prevent further damage. The government must engage in meaningful dialogue with business owners, economists, and parliament to develop a more equitable and effective tax policy that does not disproportionately harm the most vulnerable members of society.

If this tax is not repealed, the Somali government will be held accountable for the ensuing economic hardships and social unrest.

The people of Somalia deserve a government that understands their struggles and works tirelessly to improve their lives, not one that imposes policies that push them deeper into poverty and despair. The President must act now to correct this egregious mistake before it is too late.

(By: Dr Abdillahi Hashi Abib, Member of Somalia Federal Parliament)

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