As public debate intensifies over the introduction of the Goods and Services Tax (GST), the Ministry of Finance and Economic Development of Somaliland has moved to reassure citizens that the tax is not a new burden but a modernization of an existing tax system that has been in place for nearly three decades.
The ministry has confirmed that the revised GST framework will officially take effect on August 1, prompting widespread discussion among businesses, lawmakers, and the public over its implementation and impact.
In a televised discussion broadcast by MM Somali TV, Ahmed Abdi Ali Toor, Deputy Director of the Inland Revenue Department, and Abdirahman Mohamed Ibrahim, an official from the Financial Management Reform Department, responded to questions from members of parliament, academics, and other participants seeking clarification on the new system.
Addressing concerns that GST represents a newly introduced tax, Ahmed Abdi Ali Toor explained that the tax has existed in Somaliland since 1996, when it operated as the Sales Tax under Law No. 84/1996. At that time, a 3 percent tax was imposed only on imported goods.
According to Toor, the key distinction between the former Sales Tax and the current GST lies in how the tax is structured. While the Sales Tax was collected only once, GST is legally designed as a multi-stage tax, allowing it to be imposed at different points throughout the commercial supply chain. However, he noted that the stages at which it is collected depend on the government’s administrative capacity and can be implemented gradually as permitted by law.
He further explained that Somaliland undertook a comprehensive overhaul of its financial legislation in 2016, introducing Revenue Law No. 72, which formally replaced the Sales Tax with the Goods and Services Tax. The reform was followed in 2021 by implementing regulations that modernized the tax system and enabled service providers—including hotels, electricity companies, and water utilities—to begin incorporating GST into the prices charged to consumers.
Toor said the latest public concerns stem primarily from amendments made under Revenue Law No. 72/2025, which expanded the range of services subject to GST by removing certain exemptions. He argued that misconceptions surrounding the reform have led some members of the public to mistakenly view it as an entirely new tax, whereas the ministry’s objective is to improve understanding of an existing system.
Explaining the principles underpinning GST, Toor said the tax is built on two core foundations. The first is transparency in identifying who pays the tax, who collects it, and who ultimately receives it. Under the system, the final consumer purchasing goods or services bears the tax, businesses merely collect it on behalf of the government, and the Ministry of Finance is the only authority legally empowered to administer and receive the revenue.
The second principle, he said, is modernization. Businesses will be able to remit GST electronically from their offices or homes through a digital payment system, with funds transferred directly to the Inland Revenue Department before being deposited into the Central Bank of Somaliland.
Speaking during the same programme, Abdirahman Mohamed Ibrahim described GST as a multiple-stage consumption tax, noting that this principle is clearly established in Revenue Law No. 72/2025 and its implementing regulations. He cautioned that interpretations lacking legal or technical expertise risk misleading the public about how the law operates.
Abdirahman also explained that if GST were fully applied at every stage of the commercial supply chain, businesses would need to be reimbursed through a tax refund mechanism to prevent the tax burden from accumulating and ultimately increasing costs for consumers.
To simplify implementation and reduce pressure on households and businesses, he said, the President and senior officials at the Ministry of Finance agreed to reduce the applicable GST rate from the 5 percent provided for in law to 2.5 percent during the current phase of implementation.
He further clarified that, as a consumption tax, GST does not apply when an importer sells goods to a wholesaler or when a wholesaler sells to a retailer, since those transactions are made for commercial purposes rather than final consumption. Instead, the tax is collected only when the product or service is purchased by the end consumer for personal use.
Concluding the discussion, officials from the Ministry of Finance and Economic Development urged citizens to rely on official legal sources when seeking information about the tax reforms. They emphasized that GST should not be viewed as a newly introduced tax but as the modernization of a long-standing taxation system intended to create a more transparent, efficient, and equitable method of revenue collection while ensuring that the tax burden rests with the final consumer.