Thursday September 4, 2025
Participants attend Somalia’s annual tax forum in Mogadishu, where government officials and business leaders discussed the country’s new tax law aimed at modernizing revenue collection and reducing reliance on foreign aid. CREDIT / SONNA
Mogadishu (HOL) — Somalia introduced a new tax law at its annual tax forum this week, a reform officials say will modernize revenue collection and reduce the country’s reliance on foreign aid.
The forum, held in Mogadishu, provided a platform for dialogue between public institutions and the private sector.
Somalia’s tax-to-GDP ratio was just 2.6 percent in 2022, among the lowest in the world, compared to an African average of 16 percent.
“This new tax law is a crucial component of our efforts to build a stronger and more self-reliant Somalia,” a government representative told participants. “By streamlining our tax processes and improving collection, we can generate the necessary resources to invest in services that our people deserve.”
The reform is central to Somalia’s commitments under its International Monetary Fund program, which requires the government to strengthen domestic revenue mobilization. The IMF has long pressed Somalia to modernize customs administration and broaden its tax base beyond the narrow revenues collected at Mogadishu’s port and airport.
The tax overhaul comes as Somalia emerges from years of debt distress. Through the Heavily Indebted Poor Countries initiative, external debt fell from $5.3 billion, roughly 64 percent of GDP, in 2018 to less than 6 percent by the end of 2023, clearing the way for new fiscal reforms.
Business leaders at the forum welcomed the reforms but called for transparency and predictability in implementation. They argued that a fair tax system would boost investor confidence and create a more stable environment for private sector growth.
Yet obstacles remain. Structural weaknesses, corruption, and insecurity threaten to undercut progress. Somalia ranked 179th out of 180 countries in Transparency International’s 2024 Corruption Perceptions Index. Al-Shabab militants continue to run a parallel taxation system in areas under their control, collecting millions of dollars monthly and undermining state authority.
The government also faces mounting fiscal pressure from droughts and humanitarian crises, which have displaced more than a million people since 2021. With more than 7 million Somalis in need of aid, officials say raising domestic revenue is critical to delivering services and building resilience.
Officials pledged to continue consultations with the private sector as the law is rolled out, describing the forum’s conclusion as a milestone in Somalia’s effort to fortify financial institutions and lay the foundation for sustainable economic development.