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Elaborate Somali insurgent tax system collects almost as much as government

Credit: REUTERS/FEISAL OMAR

Somalia's al Qaeda-linked al Shabaab insurgency is collecting almost as much tax as the government through a sophisticated system of levies on activities from importing goods to irrigating crops, a think-tank report found.

By Katharine Houreld

NAIROBI, Oct 27 (Reuters) - Somalia's al Qaeda-linked al Shabaab insurgency is collecting almost as much tax as the government through a sophisticated system of levies on activities from importing goods to irrigating crops, a think-tank report found.

The Mogadishu-based Hiraal Institute said al Shabaab's tax collectors were bringing in an estimated $15 million per month. Its report was based on more than 70 interviews with businessmen, government officials, al Shabaab defectors and active members of the insurgents' tax collection cell.

It examined receipts and income reports from religious taxes and fees charged on activities such as crossing checkpoints, running businesses, irrigating or selling land, or exporting or importing goods.

One senior Somali military commander told Hiraal that he had to pay the insurgency $3,600 in taxes to finish building his house. The first contractor he'd hired quit after al Shabaab threatened him because the commander had not paid taxes; the second contractor stopped work for the same reason. Even trucks carrying his construction materials would not move, the commander said, until he'd made his payment.

Hussein Sheikh Ali, Somalia's former national security advisor and founder of Hiraal, said al Shabaab's tax collection had grown more efficient since the think tank published a first report on the militants' finances two years ago.

"These people are really into the business of money making," he told Reuters. That didn't mean they are corrupt, he said.

"They are strategic, they are serious, and they will look for ways to weaken their adversaries - the Somali authorities."

Hiraal's report comes in advance of a U.N. report expected to say al Shabaab is generating a significant cash surplus and moving millions of dollars through the formal banking system.

"This is an area that the panel prioritises and will continue to investigate," Natascha Hryckow, the head of the U.N. sanctions panel on Somalia, told Reuters.

Much of al Shabaab's revenue comes from ports, said Mohamed Mubarak, a Hiraal director, especially Mogadishu, where militants tax shipping containers the same way the government does.

Another big revenue stream is zakat, an annual religious tax of 2.5% of an individual's wealth, Ali said.

Al Shabaab is extremely adaptive, Ali said, and is following the government in adopting new taxes in areas such as healthcare or education.

"They're kind of learning," Ali told Reuters. "If (Finance) Minister Beileh gets a new taxation bracket for a business, Shabab will say aha, we will also tax this one."

The insurgency often calls and questions business entities such as the Chamber of Commerce, or government agencies responsible for particular brackets of taxation, he said.

The Chamber of Commerce did not return calls seeking comment. Somalia's Finance Ministry also did not immediately respond to requests for comment. The federal government raised $230 million in domestic revenues last year.

A senior Somali counter-terrorism official told Reuters that the insurgency was probably collecting millions per month but that it was hard to get the full picture.

(Additional reporting by Abdi Sheikh Editing by Peter Graff)

((katharine.houreld@thomsonreuters.com; + 254 796 142 176;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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