Somali traders shut down businesses in protest against digital tax

Several traders in Somalia closed their shops in protest against the newly introduced digital sales tax, which had a significant impact on businesses.

The new tax, which came into effect on Sunday, August 18, requires all traders to impose a 5 per cent fee on all electronic transactions as the country aims to restore its economy.

Traders from Baraka Market in Mogadishu closed down their business for the second day on Monday, decrying the new tax backed by the International Monetary Fund (IMF).

The merchants took to the streets, saying the 5 per cent value-added tax (VAT) on electronic payments is uncalled for since there is already a transportation tariff that is so high.

Trader Suleyman Adan asserted that they must ensure transparency and accountability prior to adopting the new tax measures.

"We are not against the tax, but we need a proper system and an end to illegal extortion from merchants before we can accept the government's directives," said trader Adan.

A resident of Mogadishu, Fadumo Adan, noted that though some businesses were complying with the government's directive, many were of the contrary opinion.

Traders have vowed to demonstrate until the government makes a move to address their concerns.

A section of lawmakers has already debated the tax and suggested a review to adjust it to help support small businesses.

However, the government says the revenue raised from this tax will help in infrastructure development and enhance the country's security.

Bihi Iman Egeh, the Finance Minister of Somalia, argued that the VAT is a transparent tax, established by a 1984 law and already approved by parliament. He claimed the traders' protest was over a misunderstanding, but he did not provide more details.

Recently, the International Monetary Fund (IMF) Executive Board approved Sh9.6 billion (US$100 million) under a new Extended Credit Facility (ECF) arrangement for Somalia.

The agreement reached on December 19, 2023, included an immediate disbursement of SDR 30 million (about Sh3.8 billion, or US$40 million) for budget support.

The new arrangement followed the successful completion of a previous ECF programme, which expired on December 15, 2023, and the achievement of the completion point under the Heavily Indebted Poor Countries (HIPC) Initiative on December 13, 2023.