State & private sector tax agrement [Archives:2008/1139/Local News]

March 20 2008

By: Yemen Times Staff
SANA'A, March 19 ) Government and private businesses are joining together to build trust and simplify Yemen's tax system with the help of the International Finance Corporation, or IFC, and the Foreign Investment Advisory Service, or FIAS, two divisions of the World Bank.

Last week, Richard Stern, the program manager for business taxation at the Foreign Investment Advisory Service, the World Bank's business advisory arm, spoke to ministers and representatives from the private sector in Sana'a about reforming Yemen's tax system to increase the country's economic appeal to foreign investors.

The meeting's aim was to build bridges between the private business sector and the government by explaining the new Taxation Simplification Project, a wide-ranging tax reform program the IFC created for Yemen.

The country's investment environment depends on strong partnership between the public and private sectors, which are able to either facilitate or hinder business ventures, according to Stern.

“In addition to helping Yemen adopt sound technical policies based on international good practices, this program supports reform via a solid partnership between the public and private sectors, with stakeholders acting as strong champions to continue moving the agenda forward,” Stern said.

The new tax reforms are designed to ease the financial burden of investors, business owners and taxpayers, as well as create jobs and minimize corruption. Stern says the reforms will target small companies, such as importers and small-scale factories making less than YR 50 million annually. Such small companies previously haven't been subjected to standard accounting procedures in Yemen.

Stern suggested strict punishment for tax evasion and fraud, in addition to implementing a real estate tax.

The IFC tax reform project began last year with a FIAS study on tax policies in Yemen. Last November, the IFC, Yemen's Finance Ministry and the private sector agreed to streamline taxation policies using financial support from the United Kingdom to implement the policies.

“There's a strong need to improve the system,” noted Ahmed Ghalib, head of Yemen's Tax Authority, adding, “We can increase state revenues, provide better service to citizens and promote investments and economic development.”

Sana'a Chamber of Commerce Director Hassan Al-Kabous also supports the proposed tax reforms and hopes the FIAS project will help both private businesses and taxpayers.

Currently, Yemen's tax revenues are low and the economic environment is difficult for investment. According to a World Bank study, Yemen ranks 84th out of 178 countries regarding ease of tax paying and 113th out of that same number of countries for ease of doing business. The IFC will work in conjunction with Yemen's General Investment Authority to review tax exemption status and national tax revenues. Once these financial norms have been stated, the IFC will focus on reforming the nation's Tax Authority, improving its competence and transparency while reducing the potential for corruption.

The tax reform program is expected to take anywhere from three and a half years to nearly five years to implement.