Demonstrations across YemenTrades and business fear new tax [Archives:2005/826/Business & Economy]

March 21 2005

Mahyoub Al-Kamaly
The government announcement that it would enforce the law of the general tax on sales at the beginning of next July has triggered a crisis between the government, tradesmen and businessmen.

Several governorates in the past few days have seen massive protests by owners of trades demanding rescinding of the law.

While the government says the implementation of the law is aimed to unify taxes on income, production and consumption, the tradesmen fear from an increase of taxes would double prices of produced and imported goods. Such a result would hurt purchasing power of consumers.

The sales tax imposes taxes on goods and services at the time of selling and importation by 10% of their total value.

The sixth article of the law determined the volume of money for which a tax must be paid, and which must not be less than YR50 million for goods and YR40 million for services.

The Higher Council for Investment has called for a dialogue with the government, and expressed its refusal of protest enforcement of the sales tax law. And the Federation of the Chambers of Commerce and Industry has held opposition parties as being the ones instigating tradesmen and citizens for demonstration.

Protestors have taken to the streets in Sana'a, Hudeidah and Taiz, demanding the government rescind the law which the government considers as serving the consumer through the exemption from taxes of a good number of goods and services necessary for the citizens.

However, the law has also included imposition of taxes on local and imported merchandise already subject to the tax of production and consumption, namely benzene, kerosene, oils and greases by a 2% of sale price to the consumer, and liquefied gas by 0.5% of the selling price to consumer. As for oil products, the tax on selling price to the consumer is 1%. For local cigarettes, the sale tax would be 60% and for imported ones by 65%, the qat by 20%, cement by 5%, iron by 5%, car spare parts by 5% and cars by 25%.

The law, however, stipulates the exemption of sales tax on construction materials of bricks and blocks. Things also exempted are the ploughs, harvesters, seeds, fertilizers, inputs of fish production, poultry and cattle fodders. The law has defined 27 goods exempted from the sales tax. They include wheat, dairies, bread, vegetable ghee, eggs, meats, chicken, honey, soap, paper and notebooks, spare parts for tools and equipment and ambulance cars.

Tradesmen and businessmen say terms in Article16 are unclear for deduction of tax inputs, and also the law gives the taxation authority the right to amend the value subjected to tax if the selling of the goods and services are different from what is claimed.