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Considered by Private Sector to be Unjust; Sales Tax Controversy Continues
  Written By: Abdu Al-Jaradi (FOR THE YEMEN POST)
  Article Date: January 26, 2009 



Since 2001, there has been a wide disagreement between the government and the private sector over imposing sales tax and the law of sales tax has never left the papers to find its way to application.

This raises several questions into the reasons that prevent the application of sales tax law, especially when applying laws in general involve applying the sales tax law which is important for financial and administrative reforms.

The disagreement between the government and the private sector over the law application started in 2004 when the government officially announced the application of sales tax law which had been postponed four times.

By then, the postponement was made because of amendments by parliament and the law imposed 10 percent tax on the total volume of sales for businessmen whose aggregate annual sales mount to YR 50 million.

For its part, the private sector announced halting negotiations with the government over the economic policies due to be implemented. The private sector representatives called for postponing the law application, hinting that it could put further burdens on citizens and badly affect economic activities in the already suffering country.

Reacting to businessmen's rejection of the law, former Prime Minister Abdul Qader Bajamal blamed their rejection on their background and attacked them harshly, noting that opponents are those who fear opening their private books before authorities for incompliance with standards, smuggling, etc.

In July 2005, the sales tax law was applied at 10 percent and businessmen whose annual sales exceeded YR 50 million were required to register their names and report their sales to the Senior Tax-payers Administration; however, the industrial and commercial sector reached an agreement with President Saleh to apply the law in the country's outlets and not in shops or companies.

The law, in its previous form, was to be effective till the end 2006 when the percentage would decrease to 8 percent imposed on businessmen whose sales could exceed YR 50 million.

Attempting to avoid the law, the leaders of Commerce Chambers threatened to take measures against imposing the tax including comprehensive strikes and considered the government to be responsible for any passive consequences. However, the Tax Authority considered this to be an attempt by businessmen to avoid transparency.

Once the application date approaches, businessmen will launch a wide media campaign that leads to an increase in the prices of commodities, thus stirring up the citizens against the law.

As early as 2007, the government hardened its stances as for the application of sales tax law and the then Minister of Finance Saif Al-Asali assured that the law cannot be suspended only through another law. He called on Commerce Chambers to stop their resistance, stressing that it will bring about a high percentage of transparency and help protect tax-payers against blackmailing.

However, Commerce Chambers rejected the idea altogether and adhered to the previous agreement made with President Saleh where the tax is to be collected in the country's sea, air and land outlets and demanded giving up any talk about the law for five years. This rejection was made though the authorities had mentioned that they made an easy and simple mechanism for the law application including exemptions of 2007 fines and accepting the volume of tax without the field visits of tax officials.

Economist considered the private sector's rejections is evidence of the pampering attitudes, noting that it is unjustified to respond to their demands.

Former Tax Authorities Head and current Finance Minister Noman Al-Suhaibi revealed the businessmen's rejection is based on their fears from disclosing their financial accounts, something that they have not done in the past. He also assured that this will never affect the prices.

With end of 2008, the time limit came to end and sales tax has started to come up again. The government has recently started to impose the tax at 5 percent on all businessmen whose annual sales could exceed the defined figure. The plan is to be implemented on three phases: the first involves customs and factories, the second involves wholesalers and the third one involves retailers.

Studies and Economic Information Center reported last week that Prime Minister Ali Mohammed Mujawar met with eight leading businessmen, telling them that his government will impose the law and form a committee to study the sources of fears for the private sector.

Like Al-Suhaibi, the Head of Tax Authority Ahmed Ghaleb hinted that private sector leaderships seek to hinder the law application, fearing any revelation of their financial transactions.

Ghaleb noted that the law is effective and it canít be suspended, hinting that the private sector was allowed numerous chances; however, they attempt to evade this tax which is paid worldwide.

Nevertheless, some businessmen criticize the mechanism meant for imposing the law. Businessman Hasan Al-Kabous stated that the government announced executing the law; but the law-imposing mechanisms are not right and just, maintaining that the tax is paid three times as it starts at the outlets and ends with wholesalers and retailers.

In return, the General Association for Commerce and Industry Chambers saw that it is important to revise the law text. 

Head of Sana'a Commerce Chamber Khalid Mustafa told media outlets that the differences are still ongoing, but he did not define the nature of these differences and added that the demands of the private sector center on finding an alternative mechanism for imposing the law will continue.