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Abdisamad Mohamed Ali, Ali Abdi Elmi, Osman Mohamed Ali and Farah Mohamud Mohamed from civil society organisations in Puntland discussing tax.

Tax Justice in Puntland

Diakonia supported the Puntland government in collecting tax, and influenced the tax system.

In 2009 the State of Puntland’s parliament adopted a new constitution which stipulates that every citizen shall pay taxes. However ensuring effective administration of the little revenue collected and tax payment by all citizens was the greatest challenge. Information on the budgeting process as well as allocation to various state departments was also only a privilege of the high level government officials.

Puntland faces unique challenge

Puntland faces a unique challenge in developing an efficient tax system. Not only is the government of Puntland faced with having to justify why citizens should pay tax, they have also been forced to use intimidating methods – gun wielding soldiers posing as tax collectors – to ensure that taxes are collected. On one hand the people have little understanding of the purpose of taxation, whilst on the other hand there is a need for government to justify taxation and legitimise its collection.

An effective tax system is vital for effective revenue generation as it encourages states to strengthen the domestic tax base in order to decrease dependency on aid and remittances; it redistributes revenue in society to ensure equality, and ensures government legitimacy by upholding accountability to tax payers. Such a system is essential for all countries and would greatly benefit the state of Puntland in Somalia which is transitioning from conflict.

It is in the wake of these circumstances that Diakonia supported the Puntland government in mobilising resources in order to effectively play the role of duty bearer. Tax Justice Network Africa carried out a baseline study on taxation in Puntland during 2013.

"Widen tax base"

The main recommendations from the study were that the Puntland government should undertake measures to widen the tax base and reduce the heavy reliance on customs duty, create a tax system that is progressive, equitable and that does not put a burden on the poor. The tax system also needed to be transparent and accountable to the people. The findings from the study were shared with the government and validated through consultation with the Diakonia Somalia partners. A documentary on taxation was also produced by Tax Justice Network Africa.

The Africa Economic Justice program (AEJ) strives to create synergies with country programs, by connecting its regional partners with national/local partners. During 2013 and 2014 a synergy was created between the AEJ partner Tax Justice Network Africa (TJN-A) and the Diakonia Somalia program. This Puntland intervention was included as a part in the Diakonia supported TJN-A project: “Building research & advocacy capacity of civil society to undertake the tax justice campaign in Africa”. Diakonia have provided support to TJN-A since 2012. The planned TJN-A outcome was: Concrete commitment from Puntland in terms of new laws and regulations aimed at increasing revenue collection and reducing tax leakages. The intervention was carried out in partnership with the Diakonia Somalia program and the Somalia Puntland partners.

With the Baseline Study as a starting point Tax Justice Network carried out advocacy training on tax issues. The sessions brought together Puntland government ministries of labour and finance and the Somalia civil society to look at the importance of taxation in the lives of the people of Puntland. The government officials attending the sessions were enlightened on the various facets of taxation and were made aware on the importance of avoiding easy-to-reach regressive tax. The partners got to know their roles in assisting the government to come up with better budgeting plans, through the involvement of citizens and also on their need to pay up their taxes as an obligation to nation building.

Projects related to tax

Following the training Diakonia Somalia partners carried out a wide range of small projects related to tax, most aiming to create awareness among the right holders. In 9 towns in Puntland, dialogue forums were held, in which both women and men participated in discussing tax issues. The understanding of the role of taxation in everyday life and in nation building encouraged the right holders to want to know more about the government resource mobilisation and utilisation plans.

These dialogues were commended by the government because they were seen as supporting the government’s effort to mobilise resources. And they were acclaimed by the right holders as an effort to improve their participation in government budget, since they provided the information on how to hold the government accountable.

"Now I know what tax is"

The right holders are now knowledgeable about tax issues. For instance Ahmed Abdilatif, a 60 year old elder from Garowe town said; “I was among the taxation forum participants who have gained an in-depth knowledge on taxation concept. Now we have the knowledge to follow up the taxation by checking on where taxes levied on us goes. I can now fully engage in the development of Puntland”.

In addition, there is an increased enforcement of tax collection, in particular of road tax, commercial companies and international/national organisations and it emerged that people are now more willing to pay taxes. One of the main outcomes of this tax dialogues and the tax advocacy training is the formation of the Community Accountability Network, which comprises of Somalia CSO’s actors from the local organizations, including Diakonia partners and the private sector. The Community Accountability Network strives to increase the participation in resource mobilisation for the Puntland State, as well as become a pressure group on government by holding the government accountable on expenditure through regular meetings. The Network and its members created awareness and acceptance for tax collection in Puntland among the local citizens.

Talks with government

Government consultation meetings were held to follow up on the Baseline survey. A documentary on taxation was also produced and shared with the government officials in Garowe. The documentary was used as a popularizing tool to support the advocacy initiatives with the government. Raising awareness and highlighting the issues arising from the baseline to lobby the government to act and develop policies that would see the improvement in tax management. As a result the information presented provided an opportunity for the officials to see the needs in the area of policy in Puntland.

They made verbal commitments to improve tax awareness in Puntland that would help finance development interventions. The commitments included;

rechecking the tax system

improving on tax awareness

controlling the security issues

providing protection to tax collectors

The Accountability Network and CSO’s will monitor this process to see the progress. In addition, in April 2014, the Ministry of Finance announced that the Puntland government would start taxation of UN and international organizations working in Puntland. According to the head of the tax department in Puntland, this was a first of such taxation undertaken in the regional state. This decision was part of a pledge by the Puntland President to increase the government's development funding in part through higher taxation. Previously the tax base was narrow as it focused mainly on customs duty. Through increased revenue collection the Puntland government can increase its spending on development projects. In addition, the Puntland government also increased taxes on commercial firms operating in the state in order to meet regional financing benchmarks.

Diakonia influenced tax policies

It is clear that the intervention of Tax Justice Network Africa and the Diakonia Somalia partners has influenced the tax policies in Puntland. These changed tax systems will continue to shape the state during the coming years.

The example illustrates Diakonia’s unique value of bringing together diverse organisations from different parts of Africa. Thanks to this synergy, Tax Justice Network Africa, as a regional organisation promoting Tax Justice, has got a platform to promote their agenda. Also, the Diakonia Somalia partners have been able to receive high quality training and support so that they can continue the dialogue with the government and the rights holders. The Somalia country programme was also instrumental in providing venues for dialogue with the government in Somalia.