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2008 Assessment

Yemen: Integrity Indicators Scorecard

Yemen: Integrity Scorecard Report > Sub-Category: Taxes and Customs
Indicators		Score
61	Is there a national tax collection agency?	100
62	Is the tax collection agency effective?	25
63	Are tax laws enforced uniformly and without discrimination?	25
64	Is there a national customs and excise agency?	100
65	Is the customs and excise agency effective?	25
66	Are customs and excise laws enforced uniformly and without discrimination?	25

Indicator and sub-Indicator Details

Is there a national tax collection agency?

61: In law, is there a national tax collection agency?

Score:

YES

Comments: Republican Decree 29 is the legal mandate for the Tax Authority.

References: Unification Agreement of North and South Yemen

Financial Law No. 8, 1991, as amended in 1999

Republican Decree No. 29, 1993, Bylaws of the General Tax Authority, [ LINK ]

Income Tax Law No. 31, 1990, and all subsequent tax laws up to the General Sales Tax No. 19, 2001, and all their subsequent amendments

Is the tax collection agency effective?

62a: In practice, the tax collection agency has a professional, full-time staff.

Score:

100

Comments: The second source underscores a major weakness in staff capability: Even in auditing for tax purposes, the Tax Authority does not have the qualifications that will enable it to identify organizations that are systematically involved in corruption and payment of bribes, as evidenced in their own accounting books."

The second source indicates efforts to improve the tax administration, which includes the training of staff.

The Tax Authority was chosen as one of six government entities to restructure the GTA and streamline operations. Since the program is only beginning, we can assume that the staff has yet to be able to handle the increasing work load, with the application of the General Sales Tax, although 100 new staff have been hired to apply the GTA.

The third source confirms this: "Currently, Yemen's tax revenues are low and the economic environment is difficult for investment. According to a World Bank study, Yemen ranks 84th out of 178 countries regarding ease of tax-paying and 113th out of that same number of countries for ease of doing business. The World Bank Group's International Financing Corporation (IFC) will work in conjunction with Yemen's General Investment Authority to review tax-exemption status and national tax revenues. Once these financial norms have been stated, the IFC will focus on reforming the nation's Tax Authority, improving its competence and transparency while reducing the potential for corruption.

References: [ LINK ]

[ LINK ]

62b: In practice, the tax agency receives regular funding.

Score:

100

Comments: The funding of the General Tax Authority is included in annual Ministry of Budget appropriations. However, funding for reforms and restructuring comes from various international agencies, including the UNDP, UNCTAD,the International Monetary Fund, the World Bank and the Department for International Development.

References: Fiscal Year 2007 and 2008 General Budgets

[ LINK ]

Are tax laws enforced uniformly and without discrimination?

63: In practice, are tax laws enforced uniformly and without discrimination?

Score:

100

Comments: The above source states that 80% of companies avoid paying taxes.

The researcher knows of one instance when one of the biggest trading houses in Yemen provided a bank with financial statements that showed the firm making a loss. When asked how could this be possible, the supplier of the statements said that this was for "tax purposes." He finally produced statements of the company's branch in Paris, where they kept the real accounts of the firm.

About the only place in which the law is clearly enforced is in the payrolls of government employees, as the income is deducted from the salaries monthly.

There are efforts to modernize the tax administration system in Yemen, which is funded by the International Monetary Fund, the World Bank (under the Civil Service Modernization Project), UNCTAD, the European Union and other bilateral donors (DFID). The General Tax Authority is one of six pilot government agencies in which restructuring and reengineering will be carried with a view toward comprehensive reform of tax system management.

References: [ LINK ] (2 January 2007)

Personal experience

Is there a national customs and excise agency?

64: In law, is there a national customs and excise agency?

Score:

YES

Comments: The law defines the General Customs Authority (GCA) as the "central customs apparatus and the customs departments/areas, represented by the chairman of the GCA.

References: Law 14, 1990, Concerning customs, and all the subsequent customs laws that followed

Is the customs and excise agency effective?

65a: In practice, the customs and excise agency has a professional, full-time staff.

Score:

100

Comments: From the second source: "Under the direction of the NPD (National Project DIrector, ASCYUDA, or Automated System for Customs Project), the implementation is undertaken by two teams, a Functional team, three members and a Team Leader and a Technical team, eight members and a Team Leader. Both the NPD and the Technical Team Leader (who are on unpaid leave from Customs) are on UNCTAD contracts, whilst the rest of the team, including the Functional Team Leader, are regular Customs staff." (Note REGUALAR STAFF)

The Customs staff do need training in customs adminsitration in keeping with accepted international practice.

References: [ LINK ]

[ LINK ]

65b: In practice, the customs and excise agency receives regular funding.

Score:

100

Comments: The 2007 and 2008 General Budget of Yemen had appropriations for a Customs Authority, and the staff is paid from the civil service employees' payroll of the Ministry of Finance.

In addition, the GCA receives funding for some projects from international and bilateral donors (UNCTAD, DFID, European Union, International Monetary Fund, World Bank). For example, the World Bank funds the reengineering and restructuring project under the Civill Service Modernization Project, and UNCTAD, among others, is financing the ASCYUDA implementation project.

References: 2007 and 2008 General Budgets

[ LINK ]

Are customs and excise laws enforced uniformly and without discrimination?

66: In practice, are customs and excise laws enforced uniformly and without discrimination?

Score:

100

Comments: A strong effort is needed to correct many of the improprieties in the Customs Administration, including controlling smuggling and corruption, which obviously lead to direct or indirect discriminate enforcement of customs laws and approved tariffs. The second source underscores this:

"Yemen's weighted average tariff rate was 11.8% in 2000. Some import bans and restrictions, import taxes, import licensing requirements, weak enforcement of intellectual property rights, inefficient customs administration and corruption add to the cost of trade."

To underscore the inefficient application of law due to corruption, in a poll, various businessmen placed customs and taxes as third, after the judiciary, in terms of the level of corruption.

The third source states: "Yemens Customs Authority faces pressures, long land and sea borders, and civil service regulations that restrict flexibility of work practices and financial management. The introduction of the ASYCUDA system had a dramatic impact. A number of obstacles remain: anachronistic processes for documentation, a slow dispute process, inconsistent interpretation of customs law and practice, and informal payments."

It is difficult to see a uniform and fair application of customs laws in such a venue.

References: [ LINK ]

[ LINK ]