The Somaliland government has announced that it expects to nearly double its annual revenue to US$100m in 2011-a rise driven mainly by better tax collection. To this end the Ministry of Finance announced that it will target Somaliland's 40 biggest businesses and richest individuals to ensure their tax compliance. The government estimates that it is forgoing nearly US$25m in revenue a year from just the country's largest mobile-phone provider, Telesom, through laxity.

However, to sweeten the pill for the region's businesses, the government has slashed tax rates in the 2011 budget-a decision that will make it harder to achieve its target of doubling receipts. Payroll and sales taxes were cut from 12% to 5% and income tax cut to 10% from a high of 25%. The government's efforts to double its receipts will be further hindered by the lack of rain that has hit livestock production in some parts of Somaliland, which is likely to reduce receipts from livestock exports through Berbera port.

The capacity of the government to improve tax collection on its own is limited, but donors are set to help. For example, the World Bank is training tax collectors, while the US government is funding the construction of tax-collection offices. Overall, it is unlikely that any donors will provide direct support to the government, preferring to allocate aid to specific projects in areas such as school building, water infrastructure and emergency humanitarian assistance. In any event, boosting fiscal revenue significantly will be necessary to fund the recent doubling of civil servants' salaries (February 2011, The Somaliland Republic).