Al-Shabaab's Sh3 billion tax collection web in Somalia

Al Shabaab soldiers sit outside a building during patrol along the streets of Dayniile district in Southern Mogadishu, March 5, 2012. [Feisal Omar, Reuters]

Across Somalia, the terror group, Al-Shabaab is subjecting locals to different forms of taxes which serve as its primary source of income to fund its operations and expenditure, a new study has revealed.

According to the report by Hiraal Institute, Al-Shabaab has a well-coordinated system that collects taxes from citizens, in areas it controls and in those it doesn't.

The taxes are diverse and span from taxes on businesses, livestock, use of roads and shipment of goods.

Among the many taxes levied on the people, Zakawaat (a form of non-monetary tax) is most common. Troops working with different Al-Shaabab departments assisted by clan elders do the collection. Done during the month of Ramadan, one has to give one camel out of 25 and one goat out of forty.

"Collection is done uniformly across all the regions in south and central Somalia, including in the districts that Al-Shaabab does not control. Collectors issue receipts to pastoralists; those who lose their receipts are made to pay the taxes again in the next year," reads the report.

Finance offices located overtly in some areas and covertly in others collect all monetary tax including monetary Zakar "which is set at 2.5 per cent of the monetary value of a business as assessed by Al-Shabaab before profit."

The move by Al-Shaabab to impose Zakar on the value of the business is contrary to Islam which has the tax as a percentage of what one has at the end of the year.

The report shows how Al-Shabaab keeps a record of business owners in different areas and estimates their worth before determining how much they must remit.

"Goods belonging to traders in Al-Shaabab territory are assessed by accountants who go to every shop and warehouse, checking inventories, and demanding 2.5 per cent of the total worth of the goods, which is the Zakah rate," says the report.

Taxation on roads in Al-Shabaab territory

A major source of income for the terror group is rooted in its extortion of money from trucks using roads "owned by the group".

"Each truck is taxed at Sh60, 000, while larger trucks are taxed Sh125, 000 each time they use the road while carrying goods," reads the report.

However, road tax collection varies in different regions, depending on the number of trucks using the roads.

An owner of a truck operating from a region not controlled by Al-Shabaab is usually stopped at the checkpoints and asked his annual revenue. If he quotes a low value, his goods are impounded and if he quotes a reasonable one, they multiply by three and ask him to pay 2.5 per cent of that.

"Traders in areas controlled by the government and whose goods do not go through or to Al-Shaabab territory are reported on by Al-Shaabab informants; finance officials then call them and order them to pay the Zakah. Those who refuse have their files handed over to the Amniyaat for enforcement," reads the report.

Hiraal Institute describes the group's financial system as "tight" with only one known case of a collector who made away with the money. The auditors handling money are rigorously vetted before being employed, declare their assets and cash in the bank and declare their wealth when they are relieved of their duties. They are also under close supervision at all times, with people knowing their location every time.

"Al-Shaabab is financially self-sufficient; however, its expenses are ballooned by recurring payments to hundreds of officials and local influencers, many nominally in charge of areas not controlled by the group," reads the Hiraal Institute report.

The group tax revenues are estimated in this paper at Sh 3 billion (real numbers are higher) while its expenditures are around Sh 2.7 billion.

"The group has a large expenditure in recurrent payments in the form of salaries to soldiers, policemen, administrators, orphans and the maintenance of loyalties among more than 100 'unemployed' officials of the group," reads the report.

Despite the high expenditure, the group still manages to raise emergency funds annually, allowing it to stay afloat. Al-Shabaab has also never failed to pay its fighters and administrators.

How the money trail works

"Al-Shaabab moves around monies from the different regions to its de facto capital, Jilib town, by using local money transfer agencies or by direct bank deposits where there is a bank."

The report reveals how bank accounts are maintained in Al-Shabaab finance officials' names and withdrawn or transferred to other regions as planned.

The Somali government's attempts to end Al-Shaabab's financial system led to engendering the anti-money laundering and countering terrorism finances bill in 2016 and the consequent formation of the Financial Reporting Centre (FRC).

"The FRC and the occasional Special Forces attacks on the group's money collection checkpoints are the main tools to financially undermine AS. However, the group uses legitimate financial systems to move around its wealth, exploiting the weakness of the nascent FRC, which currently lacks the capability to do its job," explains the report.