Telecom Providers Allegedly Owe Government ‎Around $177 Million In Tax Evasion

Hargeysa, Somaliland , Dec 24, 2005 (SL Times) – The Somaliland minister of Posts and Telecommunication, Hassan Abdi Khayre has accused local telephone companies of tax-evasion in the region of $177 million dollars.

“The amount represented income tax owed by local operators to government” the minister said during a Somaliland Times interview conducted with him last Wednesday. He however didn’t specify the period over which the tax had been accrued.

The revelations came following last week’s announcement by the 5 major telephone operators in the country that they wouldn’t accept to interconnect through a gateway system that has been installed at the ministry of Telecommunication in Hargeysa by Transcom Digital Inc, a US-based company. TDI is registered in Virginia , USA , as a global or limited global resale service.

Under a 5-year agreement signed with TDI the ministry will receive capacity-building assistance including technical skills and management training. The central exchange system which is a complete package of hardware, software services and solution, has been provided at a cost of 3 million US dollars including costs of staff training and management support for the ministry.

The TDI would recover its capital investment from profits. But the deal would allow it become the international provider of telecommunication traffic, in itself a highly lucrative business.

According to Mr. Khayre, the quality of the telecom service will substantially improve as congestions will be resolved by the interconnection link in the gateway system. He also predicted a large expansion in telecom services and their extension to rural Somaliland .

“With the lack of interconnectivity, it has been expensive for people to go into the telecom business, but once the gateway becomes operational, you wont need a huge startup capital for renting satellite service, setting up towers, etc as all these would be provided by the gateway” he added.

But local operators have attacked the gateway project as a disguised attempt to undermine telecom businesses owned by nationals. Their two main concerns revolved around the issue of whether TDI was actually a credible company that can be trusted and why the ministry hasn’t given them the chance to bid for the supply and installation of the gateway.

However minister Khayre said the above two concern were invalid excuses. “If the TDI are crooks, which I don’t think they are, then they will not be able to recover their investment as they will have to go. On the other hand we have over the last 7-8 years been asking local operators to interconnect but they refused. We couldn’t invite bidders for the supply of the gateway because we didn’t have the money in the first place.”

Khayre also denied that the ministry was trying to usurp the role of local telephone companies. “ Somaliland follows the principles of free market economy which encourages citizens to do business, our ministry’s role is only regulatory and what we have been trying to do is good for the telecom sector as well as the country.”

Meanwhile local telephone operators have taken their grievances about the gateway to be inaugurated soon by the ministry of telecommunication, to the council of ministers. The operators have also initiated a strong lobbying campaign in Parliament urging legislators to consider an early motion in the House to debate the agreement between the telecommunication ministry and TDI in an attempt to block the deal from being ratified.