Revenue Sharing as a Basis for a Sustainable Federal System in Somalia

Abstract

Taxes from international trade account for the largest share of Somalia’s domestic revenue. How-ever, not all subnational administrations have access to ports where customs revenues are collected, creating a considerable fiscal disparity among different subnational units. This paper argues that revenue sharing from international taxes is an important step towards a cohesive and sustainable federal system in Somalia. It further presents options for revenue sharing arrangements through fiscal equalization between the Federal Government of Somalia and the Federal Member States that may strengthen the federal system and allow for more equitable access to domestic revenue.