REPORT: How complex Al-Shabaab's taxation system in Somalia works

MOGADISHU, Somalia - Al-Shabaab remains one of Al-Qaida's most active terrorist organizations in the world which could be explained by their systematic revenue collection schemes which enable the militants to effectively run their operations without any financial strains.

Recently, intelligence reports indicated that the group was even financing other terror groups across Africa but the class could not be independently verified. A report published by the United Nations shows that the group runs an annual budget of $100 million of which $24 million goes to the purchase of weapons.

The Global Initiative Network has established that the group's systematic taxation system could have after all put it at bay for a long time, explaining how the group manages to collect huge amounts of revenue from civilians. The US and Somalia have embarked on slicing down Al-Shabaab's revenue bases.

According to the report, Al-Shabaab maintains dozens of checkpoints across southern Somalia, manned by tax officials falling under the group’s ministry of finance [Maktabka Maaliyada]. Vehicles passing through an al-Shabaab checkpoint are typically registered with the tax department; if not, the driver will be required to pay a registration fee and provide details about the vehicle and its owner to tax officials.

At the checkpoint, the amount the driver should be taxed will be assessed on the basis of his destination, the size of his vehicle, and/or the type of goods he is transporting. The money is usually paid in USD but some evidence obtained shows mobile money transfer method is occasionally used.

Once a driver has paid the assessed amount, the report notes, he receives a receipt, which serves as a pass to allow him to transit through any remaining al-Shabaab checkpoints without being asked for additional fees, a tradition observed by the group across the country.

Categories and types of goods

There are various categories of taxes but the most popular one is Gadiid, or transit taxes which are paid to al-Shabaab by drivers simply for the right to use the road. Taxation amounts are calculated based on the route and the size of the vehicle.

The report establishes that reductions may be assessed based on whether the vehicle is ‘half-full’ or ‘full’, although in practice this field is usually
left blank by al-Shabaab tax officials. Transit fees ranged from US$4 to US$450, with an average amount of exactly US$100.

The second al-Shabaab taxation stream, badeeco, is applied to foodstuffs, fuel, building materials, or general cargo. Despite making up only one-third of the total data set, tax receipts for goods generated the bulk of al-Shabaab’s revenue [over 60%]. The amounts of goods tax recorded in the data set ranged from US$2 to US$975; the average amount levied was about US$257.

Thirdly, dalag taxes are applied to local agricultural produce. Al-Shabaab tax officials typically specified the type of
produce as well as the quantity, expressed in generic bags [‘loor’], 25- or 50-kilogram sacks [‘kish’], pieces [‘xobo’], or simply by an undefined number.

According to the report, taxes levied on agricultural produce tended to be nominal; most of the assessed amounts ranged between US$2 and
US$10. The taxation of agricultural products represented only about 10% of the total number of receipts in the data set, and a negligible share of the total revenue generated.

Finally, the data set contains 23 xoolo receipts [2.8% of the total], which were issued to vehicles transporting livestock. Interestingly, these receipts did not contain fields specifying a taxation amount. Rather, the receipts issued for livestock transactions appear to function as a kind of permission slip, allowing the bearer to transport a certain number of animals to market within a specified time frame.

In more than half the cases, al-Shabaab tax collectors recorded cargo contents as either raashin or bagaash, denoting unspecified foodstuffs or general cargo, respectively. Together, these two categories accounted for over 70% of total revenues.

The use of the generic terms raashin and bagaash, the report notes, indicates that the al-Shabaab officials did not deem it necessary or worth the effort to note the specific commodity being transported. The probable explanation for this absence of detail is that even in cases where the type of foodstuff is specified [sugar, for example], the tax rate applied is the same as for generic foodstuffs.

The use of such a ‘flat rate’ would obviate the need to take a detailed inventory of each passing vehicle. Fuel [shidaal] trucks generated the most lucrative tax revenues, at an average of US$520 per receipt. Trucks carrying fuel accounted for 6.9% of the total tax revenue generated despite
comprising only 1.9% of the total number of receipts.

The relatively small number of receipts in the data set is somewhat unexpected, given the centrality of fuel to economic life in Somalia. But this is probably explained by the fact that the amount of fuel Kismayo supplies to the hinterland is much smaller than the number of other goods it supplies.

Types of vehicles and tax collectors

Al-Shabaab tax-collection officials employ a variety of equivalent terms to describe the same category of vehicle – for example, a ‘Dyno’,15 a medium-duty truck, is also referred to as an ‘Atlas’. In some instances, the name of the manufacturer is used as a metonym for the vehicle, such as the term ‘UD’ to denote vehicles manufactured by the Japan-based UD Trucks Corporation, adds the report.

The most frequently observed type of vehicle in the data set was the ‘homey’ [or ‘caasi’], which denotes a minibus used to carry either goods or passengers: 34.0% of the total receipts were issued to such vehicles. Despite their prevalence, however, only a negligible amount of total revenue [2.9%] derived from the taxation of minibusses.

The biggest revenue generators were the heavy-duty trucks referred to by al-Shabaab as ‘candamedles’. These were recorded on 15.6% of the receipts in our data set but contributed 45.9% of total revenue. On average, these trucks were subject to combined taxes [for both transit and goods] equalling roughly US$950 per journey.

The majority of receipts contained a field for the name of the al-Shabaab tax official issuing it, either printed or signed. The officials typically indicated only a given name, and often clearly a nom de guerre; one tax collector, for instance, signed his name simply as ‘Bakistaan’
[Pakistan].

Often the signature field was left blank or the handwriting was illegible; as a result we could definitively identify a tax official’s name in fewer than half the cases. In total, the report identified about 50 distinct tax officials from the approximately 350 receipts on which a name could be distinguished.

There was evidence that al-Shabaab tax officials rotated between different checkpoints.

In the process of tax collection, threats of murder and attendant violence are the sinews that hold the al-Shabaab taxation system together. If vehicle drivers [or owners] refuse to pay al-Shabaab taxes, or if drivers attempt to avoid checkpoints, they may be issued fines at twice the amount
of the tax they would have otherwise paid.

These non-negotiable fines might be issued by text message, or vehicle owners or drivers might be summoned by SMS to al-Shabaab courts located outside government-controlled areas. Al-Shabaab tax officials freely employ intimidation tactics even within Mogadishu.

In extreme cases, the consequences of non-payment can be dire. In a particularly notable instance in June 2018, al-Shabaab executed six civilians and torched 11 vehicles and their goods after they had failed to pay taxes. Fortunately, such displays of brutal violence are relatively rare.

But the specter they raise is sufficient to ensure that most commercial transporters in southern Somalia will ‘voluntarily’ transit through al-Shabaab checkpoints. Ultimately, the implicit threat of violence allows al-Shabaab to maintain its revenue generation system at a very low cost.

President Hassan Sheikh Mohamud warned business owners against funding Al-Shabaab whether through extortion or willingly, noting that those found culpable will have their business licenses canceled by the government. The US has also increased the amount for rewards for those who can positively identify Al-Shabaab taxation bases in Somalia.

GAROWE ONLINE