By Goth Mohamed Goth
The Somaliland Ministry of Finance’s recent decision to expand the Goods and Services Tax (GST) and introduce a new 2.5% levy demands a thorough examination of its broader economic and social consequences.
While the government is fully entitled to boost its revenue base to deliver essential public services, any new tax must be weighed against the current economic realities facing the population. Soaring inflation, persistently high unemployment, and the ever-increasing cost of living are already placing an immense strain on ordinary citizens.
By applying this tax to a wide range of goods and services — including mobile money transactions, which many rely on for daily survival — the heaviest burden falls squarely on low- and middle-income households. People purchasing basic necessities such as food, medicine, clean water, and other essential services will feel the pinch most directly. Ultimately, this type of consumption tax cuts into the daily lives of the public, leaving families with less disposable income at a time when they can least afford it.
Beyond the immediate impact, a critical question emerges: if large corporations and highly profitable businesses continue to operate partially outside the formal tax system — whether through loopholes, underreporting, or outright evasion — is it fair or effective to impose yet another levy on impoverished citizens who are already struggling to survive?
A more efficient and equitable approach to increasing national revenue would involve several parallel measures. First, broadening direct taxes on large-scale enterprises and highly profitable companies would ensure that those with the greatest capacity to pay contribute their fair share. Second, intensifying the fight against tax evasion and illicit financial flows would capture revenue that is currently lost. Third, improving overall tax administration and revenue collection systems, alongside enhancing the efficiency of government expenditure, would generate more resources without punishing the poor.
Crucially, any fiscal policy must protect the purchasing power of ordinary citizens. Failing to do so risks triggering further inflationary pressures and deepening the cost-of-living crisis, which would ultimately undermine the very social stability that government spending aims to support.
A strong and capable government certainly needs robust revenues. However, those revenues should be generated through a system rooted in fairness and equity — not one that consistently places the greatest burden on those living in the most difficult circumstances.
Thus, the central question remains: Is this new 2.5% tax increase a genuine solution to the government’s revenue shortfalls, or does it simply add yet another weight onto the shoulders of citizens already buckling under the pressure of inflation and a punishingly high cost of living?
