Mogadishu, Somalia β For the second consecutive day a businesses in Mogadishu’s bustling Bakaaro Market have shut their doors in protest of the newly enforced 5% Value Added Tax (VAT) on electronic transactions. The market was a vital economic hub in the Somali capitalΒ has been eerily quiet as shop owners and merchants voice their displeasure over the tax’s impact on their operations.
The Ministry of Finance minister Bihi Egeh, has insisted that the VAT is targeted at consumers during purchases, not at business-to-business transactions or person-to-person transfers that do not involve sales. “The VAT applies to consumers at the point of purchase,” said Egeh, aiming to clarify the policy amidst growing tensions.
BihiΒ assured the business community that the tax would not be collected during transactions between merchants using wallet or electronic accounts and would not affect non-commercial personal transactions.
Despite these reassurances the move has ignited a fierce debate within the Federal Parliament of Somalia. The discussion centers on the federal government’s push for self-sufficiency in income, a goal that has gained support among many Members of Parliament.Β Β Β However, the reliance on international aid remains a critical component of Somalia’s budget, a fact that complicates the discourse.
Finance Minister Bihi Egeh addressed the parliament on Monday and stating that the concerns raised by the business community had been acknowledged and addressed prior to the tax’s enforcement. “The 5% VAT on electronic and wallet transactions has become effective today. The concerns raised by the business community have been addressed and should have been resolved,” Egeh said in his speech.
Despite these efforts, the market closures show that merchants are still worried about how the VAT and corruption might affect their businesses and the economy. As the situation drags on, the FGS is under increasing pressure to address these concerns while also managing its reliance on international aid.