PART ONE
In this series of articles I will present how the Somaliland economy is being managed by the respective government institutions. Those institutions includes those who are responsible the nation’s fiscal policy management, Monetary policy management, Revenue generation/establishment of revenue base, Safeguarding and control of the nation’s assets, investment policy, business, trade, and commerce.
REVENUE GENERATION AND THE REVENUE BASE
The institution responsible for the government revenue generation and the establishment of revenue base is the Ministry of finance. The Minister of finance has made progress in increasing custom’s revenue and establishing a control environment. The increase in custom’s revenue and the slight increase of inland revenue was due to the fact of the Minister’s initiative of installing a web of informers in all the main customs of Somaliland and by twenty four seven strict supervision and soldiering day and night.
The Minister of finance is an engineer by profession with no previous public finance and economic management experience. In fact it is not necessary that he is an expert on this, however it is paramount important that he recruits people who are expert on this field and uses, and applies their advice promptly, nevertheless, the Minister runs the Ministry on hear and say and uses as a source of advice a group of his close circles who are local universities graduates or less with no proper professional training.
This has resulted a poor economic management such as the introduction of new taxes, rate increases without parliamentary approval and proper analysis as far as the new tax’s impact on the society in terms of equity, wealth redistribution, progressiveness, and competitiveness in comparison with regional rates.
……….The million questions is then is this revenue increase and decrease in custom’s corruption initiated by the current Minister of finance is sustainable or not?
The answer is no, because of the following reasons:
- If the current Minister of finance leaves office, replaced, or becomes sick, everything will go back as they were when he came to office; either it is the decrease of corruption or increase of revenue, because he did not establish strict internal control mechanism in preventing, detecting and controlling corruption.
- He did not introduce a sound public finance system which makes possible the continuation of his achievements in the near and long-term future.
- The Minister and only two of his close circles are aware of what is going in the Ministry. There is no information sharing with the director general, or vice minister etc. If the current Minister leaves office, it would then be very hard to trace what was going on in the Ministry since there is no established policy and procedures to follow and system of accounting and management information systems.
Further, it is worth mentioning that the President of the republic gave the Minister full autonomy with zero interference as far as the management of the Ministry and the economy is concerned. The figures he presents to the public and the President is not being independently verified which gives him a room or chance to cook books and inflate figures. As a matter of accounting principle, every financial report to be reliable, should be independently verified by a third party, in this case it would be the President’ staff and annually the auditor general. This clearly shows the respect and autonomy given by the president to him which can not be found in any government in the world.
His success in revenue increment is due to the increase in custom revenue such as Kalabaydh, the question then is what will happen if the products come through those customs decrease or stop? The answer is that the government will lose a lion share of its revenue. A well known financial management principle tells us “to not put your egg in one basket” in other words to make diversification in terms of sources of revenue and to make innovative sources of revenue generation continuously.
As far as revenue source diversification is concerned, the Ministry did not succeed on the collection of annual income tax from the big companies in Somaliland, due to the mere fact that they do not have a system of collecting such tax and not aware of the available laws which would have make it easier to collect such as the Somaliland company law. Section 140 of this law clearly mentions the duty to deliver annual returns comprising of the following:
(1) Every company shall deliver to the registrar successive annual returns each of which is made up to a date not later than the date which is from time to time the company‘s ―return date
that is –
a) the anniversary of the company‘s incorporation, or
b) If the company‘s last return delivered in accordance with this chapter was made up to a different date, the anniversary of that date.
In addition section 163 of this law clearly shows the requirement to appoint auditors;
Section 163 – Duty to appoint auditors
(1) Every company shall appoint an auditor or auditors in accordance with this chapter.
This is subject to section 165 certain companies exempt from obligation to appoint auditors.
(2) Auditors shall be appointed in accordance with section 164 (appointment at general meeting at which accounts are laid) except in the case of a private company which has elected to dispense with the laying of accounts in which case the appointment shall be made in accordance with section 165.
It is worth mentioning that this Minister prepared this law when he was the Minister of commerce back in 2005. The enforcement of this law would have helped them to assess annual company income which is verified by an independent auditor as the law requires.
—–Please follow the other parties of this series.
By: Mohammed Dahir Ahmed ( Hiilliye)
Certified Chartered Accountant (ACCA)
