Somalia's tax to GDP ratio problem

[Barkhadle1520]

This is a big problem, even if politicians didn't steal some of the budget, its way too tight for a country like Somalia facing significant challenges like millions of displaced people and Al Shabaab as well as very bad road infrastructure etc

FGS tax to GDP ratio is one of the lowest in the world at only 2%, and they're calculating this using the formal GDP, using the real GDP it is less than 0.25%

To give you an idea of how low that is, they make only around 100M in taxes and Dahabshiil makes 10 times that in annual revenues, in fact Hormuud and other big Somali companies like Dahabshil are the ones donating money to rehabilitate millions of IDPs

No modern government can function like this, even Al Shabaab makes enough taxes to sustain themselves and their military campaigns

What can the FGS do to improve this and have they already taken initatives ?

 

[Zak12]

FGS has to first invest to create state owned businesses and industries in order to provide public services. Its lunacy to tax a population that is already burdened with fulfilling the tasks the government should be doing and if said government can't even provide basic needs to its citizens, then naturally there will be a distrust and a tax base will be difficult to establish.

IMO, Idilina said it best that tax collection as the main form of revenue for a poor country like Somalia isn't the way to go. It all comes down increasing wages, earning power, and improving human capital in general.

Aside from the taxing businesses issue. I have to say that at this early stage, the most sustainable model is what Kacaan pursued, building strong, state owned enterprises and export driven industries that generated direct national revenue. That approach reduced the tax burden on everyday people and allowed the state to fund services, salaries and infrastructure without leaning entirely on foreign aid or squeezing citizens.

You can’t extract taxes from a population that hasn’t been economically empowered first. Basically the majority are already carrying the weight of infrastructure, services, and development on their own. They have so many living expenses and services they have to pay for out of pocket for education, health, security, water, electricity etc, so adding formal taxes on top of that becomes crippling.

You can see how crippling this taxation has been for Somalis in NFD, Ogaden and during the colonial systems. They never even provided public services or development in return.

Take NFD for example , locals are still complaining about the same neglect. Garissa and Mandera sit on major rivers that could be used for hydroelectric power and clean drinking water, and there's extensive farmland. But nothing meaningful has been developed. It’s the same extractive model: take from the people without investing in their future.

You need to build collective earning power by investing in productive sectors, agriculture, manufacturing, fisheries, logistics, build up internal markets, before you talk about tax-based revenue.

That’s also one of the main reasons the FGS model is failing , beyond its legitimacy crisis. It reversed the logic of state building, instead of first investing in and empowering society, it tries to tax a population it has given nothing to. So it comes across as predatory and extractive, not representative or developmental.

Right now, Somalia’s private sector is the only functioning engine of growth, but without integration into a Somali-led public framework, foreign actors will keep exploiting that disconnect, like with the Turkish oil deal or the various Gulf entities. The goal should be a hybrid model: a strong private sector working in tandem with a state that actually serves the people, not one propped up by foreign funds.

But who am I kidding? FGS is addicted to foreign aid and therefore has little incentive to find other sources of revenue. Its a government that was set up to fail from the beginning.

 

[Barkhadle1520]

FGS has to first invest to create state owned businesses and industries in order to provide public services. Its lunacy to tax a population that is already burdened with fulfilling the tasks the government should be doing and if said government can't even provide basic needs to its citizens, then naturally there will be a distrust and a tax base will be difficult to establish.

IMO, Idilina said it best that tax collection as the main form of revenue for a poor country like Somalia isn't the way to go. It all comes down increasing wages, earning power, and improving human capital in general.





But who am I kidding? FGS is addicted to foreign aid and therefore has little incentive to find other sources of revenue. Its a government that was set up to fail from the beginning.

True, but tbh their biggest problem is AS and they dont have enough money to go against them and build stuff, even worse they steal sometimes up to half of the defence budget

 

[Zak12]

True, but tbh their biggest problem is AS and they dont have enough money to go against them and build stuff, even worse they steal sometimes up to half of the defence budget

It wouldn't take a whole lot to defeat AS. They already have Turksom which churns out thousands of troops along with the thousands more that are trained by Eritrea. SNA + local clan militia + American air support can wipeout AS. There is also the necessary approach of reconciliation and setting up dialogue between local leaders.

None of it will be easy but its very possible. Here is the thing however, FGS doesn't have the will to do any of it. Its easier to play musical chairs with FMS than actually addressing AS.

 

[Bursalah]

First layer of checkpoint probably has an underpaid man from a certain clan with a gun. It’s possible he and his boys pockets 10-20% of the collected sum.

Commander collects from multiple checkpoints and he pockets a modest 10-20%

Regional district accounts for their area and of course skim a nice 10-20%

Federal office gets their hand on it and of course another 10-20% before the final sum is entered into the official talley.

40% on the low end up to 80% in some dangerous areas. Who watch’s the watchers? If everyone knows it’s an open secret why not get in on it? Front line soldiers skimming I get it it’s a dangerous job where they don’t get paid for months on end (!) but then commander and district commander and deputy cheif not to mention the chief himself and his 85 family members take far too much. 5% max corruption allowance would be the way to go.

 

[Barkhadle1520]

It wouldn't take a whole lot to defeat AS. They already have Turksom which churns out thousands of troops along with the thousands more that are trained by Eritrea. SNA + local clan militia + American air support can wipeout AS. There is also the necessary approach of reconciliation and setting up dialogue between local leaders.

None of it will be easy but its very possible. Here is the thing however, FGS doesn't have the will to do any of it. Its easier to play musical chairs with FMS than actually addressing AS.

Bro the troops are useless eritrean or turkish doesnt matter, they all desert cause they arent paid

 

[Barkhadle1520]

First layer of checkpoint probably has an underpaid man from a certain clan with a gun. It’s possible he and his boys pockets 10-20% of the collected sum.

Commander collects from multiple checkpoints and he pockets a modest 10-20%

Regional district accounts for their area and of course skim a nice 10-20%

Federal office gets their hand on it and of course another 10-20% before the final sum is entered into the official talley.

40% on the low end up to 80% in some dangerous areas. Who watch’s the watchers? If everyone knows it’s an open secret why not get in on it? Front line soldiers skimming I get it it’s a dangerous job where they don’t get paid for months on end (!) but then commander and district commander and deputy cheif not to mention the chief himself and his 85 family members take far too much. 5% max corruption allowance would be the way to go.

We arent last on the Corruption index for nothing

 

[Zak12]

Bro the troops are useless eritrean or turkish doesnt matter, they all desert cause they arent paid

Yeah that's my point. FGS refuses to pay them because it doesn't care. All the pieces of the puzzle for a successful campaign against AS are there but FGS squanders it.