By Benadeta Mwaura - Reporter
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Somalia, October 26 ,2026 - For a Somali household already feeling the cost of fuel, transport and everyday goods, the words “domestic revenue mobilisation” can sound like a warning that another tax bill is coming.
But according to the World Bank, Somalia’s next phase of tax reform does not necessarily have to mean higher taxes for everyone.
Instead, the focus could be on making the country's fragmented tax system more coordinated, widening the number of people and businesses contributing to public finances, and reducing inefficiencies that can ultimately raise the cost of goods.
The issue is at the centre of the World Bank’s Somalia Public Finance Review: The Next Stage of Public Finance, which examines how the country can raise and manage more domestic resources while protecting households and businesses.
At a pre-launch briefing, World Bank Senior Economist and PFR team leader Stella Ilieva said the objective was not simply to collect more money from citizens and businesses.
“The objective however is not simply to collect more but to build a revenue system that is fairer, more predictable and more supportive of private sector development,” Ilieva said.
OIlieva said the tax charged on a 200-litre barrel of imported gasoline differs significantly depending on where it enters Somalia. The tax was cited at $26.50 in Mogadishu, $9.26 in Puntland and $7.30 in Jubaland through Kismayo.
She argued that greater cooperation between the different levels of government could eventually help harmonise rates and reduce such disparities.
“If there is a good collaboration cooperation between FMS is an agreement that the rates will be one and the same,” Ilieva explained, adding that this could mean citizens in Mogadishu would not have to pay several times more than those in other parts of the country.
The example points to a wider challenge identified by the World Bank: Somalia operates with different tax arrangements, administrative systems and enforcement practices across jurisdictions.
For ordinary consumers, such differences can be difficult to see in a government revenue table. But they can become visible through the prices people pay for fuel, transportation and other goods.
The report argues that Somalia therefore needs to broaden its tax base while improving compliance and coordination, rather than relying on a narrow group of taxpayers and existing trade taxes.
World Bank Senior Governance Specialist Mahmoud Yassin said Somalia currently collects relatively little from trade taxes compared with some other countries in the region, despite the importance of imports to the economy.
He said the situation creates a difficult equation: citizens expect the government to provide better services, but the revenue available to finance those services remains limited.
The World Bank is also examining whether a more modern sales-tax system, potentially including a future move towards value-added tax, could make the system more efficient.
The distinction matters because the current system can result in taxes being applied repeatedly as goods move through different stages of a transaction.
Ilieva explained that a modern VAT system could reduce this cascading effect because businesses would receive credits for taxes paid at earlier stages.
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“The overall tax burden will be much lower than what it is now,” she said when explaining the potential effect of such a reform.
However, the World Bank report also recognises that introducing VAT comes with risks, particularly in a country where household incomes are low and public trust in government systems remains a concern.
The report recommends that any VAT design should balance revenue mobilisation with inflation risks and public resistance. It also suggests that targeted measures such as cash transfers or mobile-money rebates could be considered to protect households affected by taxes on essential goods.
That means the question facing Somalia is not simply how much tax citizens should pay, but how the country can build a tax system that raises more reliable revenue without placing an excessive burden on poorer households and productive businesses.
Ilieva said reforms should be designed carefully because of Somalia's high poverty levels and low per-capita income.
She pointed to excise taxes as another possible source of revenue, noting that such taxes can focus on luxury goods and products considered harmful to health, potentially placing more of the burden on higher-income consumers.
The report similarly calls for tax reforms to be coordinated so that changes to customs, sales and excise taxes do not unintentionally increase the final tax burden on essential supplies.
For Somalia's businesses, the reform conversation is equally important.
A broader and more predictable tax system could give businesses greater clarity about what they are expected to pay, while stronger compliance could reduce the advantage enjoyed by firms that operate outside the formal tax system.
But the World Bank's message is that reform needs to go beyond collection.
Somalia must also demonstrate that additional domestic resources can translate into better public services.
The Public Finance Review therefore links revenue mobilisation to spending on areas such as education, health, infrastructure, social protection, security and climate resilience. Without stronger domestic revenue, the report warns, government will have limited resources to meet these needs.
For citizens, that makes the tax debate ultimately less about taxation itself and more about the relationship between what people contribute and what they receive in return.
Somalia's next stage of public finance reform will therefore test whether a country seeking to strengthen its domestic revenue base can build a system that is not only capable of collecting more, but also more predictable, coordinated and fair.
As Ilieva put it, the goal is not simply to collect more.
It is to build a revenue system that works better for citizens, businesses and the government.