YEMAN. After three years of discussions between the commercial sector and the government about applying the sales tax law, it was announced last week that the law would come into action from this month.
This follows the High Constitutional Court's refusal of the commercial chamber's appeal concerning the illegality of the law.
Ahmed Ghalib, Director of the Tax Authority, emphasised that the law with all its mechanisms would be implemented from the beginning of this month.
The law will be implemented on all taxable items, both local and imported, in three stages: at customs or on the factories, on the supplier and on the retailer.
The tax at all the stages will not exceed 5%, Abdulrab Al-Zarei, General Manager of the Sales Tax at the Tax Authority, explained.
He also questioned why traders and businessmen are worried about the law since the consumer - not them - is the one who will pay. He said that merchants are worried about the law because they will be have to draw up clear accounts of what they have sold that will be evidence of their annual income so that they will have to pay their income tax without cheating.
The government is preparing to join the World Trade Organization (WTO) which asks for the cancellation of custom fees as a condition to join, according to Al-Zarei. Because the government is gradually decreasing custom duties, it seeks to compensate by finding alternatives to support the public treasury.
He added that tax revenue is on the rise, since tax revenue for 2008 is expected to exceed that of 2007 as December revenues have not yet been collected.
On the other hand, the private sector is worried about the methods and timing of applying the new law. Ahmed Bazaar, head of the Yemeni Businessmen Club, stated to the local press that the government should not rush into applying the sales tax law. He said that Yemeni businessmen oppose the law because it includes some items that are unjust and that violate the constitution.
Since the issuing of the sales tax law, traders, lower-income families and the government have been unable to agree on the law's application. In 2005, demonstrations were held in the cities of Sana'a and Hodeidah against the law.