IFC Engages Key Stakeholders for Tax Reform in Yemen

Senior government officials, members of parliament, and the private sector came together today to discuss key elements of the Yemen Tax Simplification Program, a wide-ranging reform initiative launched recently with support from IFC, a member of the World Bank Group.

In addition to technical aspects of the program, attendees discussed critical needs, including developing responsible participation by the public and private sectors; widening the tax base through compliance and registration of more businesses; raising awareness and improving access to information; strengthening the tax authority’s systems, services, and skills; and engaging with the tax courts, civil society, and the media.

The workshop in Sana’a and another in Aden on March 9 were welcomed by government authorities and private sector representatives. “There is a strong need to improve the system, build capacity, and expand the taxpaying community. We can increase the state’s revenues, provide better service to people, and promote investments and economic development,” said Ahmed Ghalib, Head of the Tax Authority. This view was echoed by Hassan Al-Kbous, Head of the Sana’a Chamber of Commerce, who endorsed the reform effort while stressing the importance of a “practical vision applicable to the Yemeni economy, one that is also not unduly burdensome on taxpayers.”

Reform of Yemen’s tax system is a significant step to improving the country’s investment climate, as revenues are relatively low, with corporate taxes being relatively burdensome in comparison to the personal income tax. At present Yemen ranks 84th out of 178 economies on the ease of paying taxes and 113th on the ease of doing business, according to the World Bank’s Doing Business 2008 report. In the Middle East and North Africa, Yemen ranked ninth out of 17 economies, with neighboring Saudi Arabia clinching the region’s top ranking, Oman ranking fourth, the United Arab Emirates fifth, and Jordan sixth.

With the launch of the tax simplification program, Yemen is taking measures to improve its Doing Business rankings. Managed by FIAS, the World Bank Group’s investment climate advisory service, the program focuses on simplifying tax policy and processes to make them more accessible to entrepreneurs and easier for the tax authority to administer. It also aims to reduce the time and cost to comply with the rules, as well as to widen the tax net, facilitate the formal registration of businesses, support job creation, and reduce avenues for corruption. The program follows an understanding in November 2007 between IFC, the Ministry of Finance, and the private sector and has donor support from the U.K. Department for International Development.

“In addition to helping Yemen adopt sound technical policies based on international good practice, this program supports reform through a solid partnership between the public and private sector, with stakeholders acting as strong champions who will continue to move the agenda forward,” said Richard Stern, FIAS Program Manager for Business Taxation.

The workshops in Sana’a and Aden mark the beginning of a series of consultations and dialogue between the government and private sector, a key priority for the program.