Somalia eyes up to $30m annually in new khat tax rates

Somalia is projecting to generate close to $30 million annually from khat taxes should a proposal by Finance Ministers from the Federal Government and regional administrations be adopted.

A two-day meeting of Finance Ministers from the two levels of government agreed to increase taxes on khat imports to $4 per kilogram from the current $2.5. A kilogram of khat is about $20 but can rise up to $100 when supplies shrink.

The Federal Government earned $13.4 million from taxes on khat in 2019 and was projecting an increase to $14 million this year. However, that expectation has been wiped out by COVID-19 pandemic which has seen Somalia suspend imports of the leafy stimulant since April.

The decision by the Finance Ministers to increase the tax is a shock to khat exporters particularly in Kenya which is the main source of the commodity for Somalia. Ethiopia exports largely to Somaliland and Puntland.

Kenya’s exports to Somalia in 2019 stood at $110 million with most of this being a result of khat exports.