SOMALI GOVERNMENT SEEKS END TO TAX-FREE BUSINESS FOR TELCOS

Telecoms

Years of tax-free business that have turned anarchic Somalia into a surprising hub of free-market enterprise may be coming to an end as the government targets the lucrative telecommunications trade. Despite violence and disease that have killed thousands since 1991 when warlords toppled dictator Mohamed Siad Barre, business in Somalia has thrived.

The country has three mobile telephone operators that run relatively reliable networks with some of the cheapest rates in Africa. Last week the government ordered Telkom Somalia, Hormuud and Nation Link each to pay US$75,000 a month in tax effective immediately.

Posts and Telecommunication Minister Abdi Mohamed Tarah Tarah was quoted by local radio as telling representatives of three firms over the weekend that "the government needs money".

"You will be required to pay tax from now on. Our country is in ruins. We are the ones who destroyed it with our own hands. Nobody will come to rebuild it for us. It's upon us," he said.

Imposing tax -- a basic government function -- appears to be no small task in Somalia, where businessmen have their own militias to ensure the free flow of trade in a nation that has been an unregulated and violent free-for-all since 1991. Many see it as an acid test for President Abdullahi Yusuf's shaky but internationally recognised government.

"We hope the government will start performing otherwise we will be losing a lot. We hope it's not taxation without representation," Telkom Somalia senior manager Mustaf Abdullahi told Reuters.

Free of taxes for a long time, apart from the cost of paying off local warlords and funding their own militias, businessmen are having to adjust and say they are willing if they get some services from government in return.

"Officials from the ministry told us we are required to pay the money end of the month. It's a bit high," Mohamed Abdullahi Sheikh, president and CEO of Telkom Somalia, told Reuters.

Abdullahi, the senior Telkom manager, said the government must deliver good security and rebuild roads and other infrastructure to cut down on huge costs companies incur. "The business is profitable but comes with its risks," Abdullahi told Reuters. "We are not used to paying taxes since they were zero regulations before this government came."  Gunbattles frequently destroy the company's expensive equipment, he said.

Speaking minutes after pulling a new phone line to a client, one Nation Link technician who declined to be named said the taxes should be based on how much a company earns. "I don't think we even make that much money," he said, shaking his head. "We are ready to pay taxes but I think that's too much. The government should state a reasonable fee."

(SOURCE: Reuters)