The aggressive tax push is fallout from an economic war being waged as part of the five-year military campaign between the Houthis and the government
Legalized looting: Houthis increasingly tax populace to fund the war
Five years of civil war have devastated Yemen’s economy. More than 11 million people struggle daily to find enough food, while about 22 million people are forced to skip or reduce meals to make their limited food stocks last, according to the UN’s World Food Programme.
Against this backdrop, the Houthi rebels are rolling out aggressive taxes in their densely-populated areas of control. The tax push is part of an economic war being waged as part of the five-year military campaign between the Iran-aligned Houthi rebels and the Saudi-led coalition backing the internationally recognized government of Yemen’s President Abdrabbuh Mansour Hadi.
In response to tightening oil import restrictions which have eroded Houthi revenues, the rebels have looked elsewhere for income, including through more aggressive tax collection from the approximately 20 million people living in rebel-held areas.
By some estimates, the Houthis have increased revenue from tax collection by 500 percent, compared to pre-war tax revenues, according to Abdulghani Al-Iryani, senior researcher at the Sana’a Center for Strategic Studies. And that fivefold increase is only about half of what the Houthi-run Ministry of Finance plans to collect, he said.
“The Houthis will continue to increase their pressure to pay the full tax,” Al-Iryani said. “In the meantime, the suffering of the people is increasing massively.”
In the early years of the war, one of the Houthis’ main sources of revenue came from the taxation and sale of imported petroleum products, some of which Iran donated to the rebels, as detailed by the UN panel of experts on Yemen. With the help of the UN and the Saudi-led coalition naval ships, the Hadi government has tried to cut off that revenue stream with two decrees.
Cabinet decree No. 75, signed in November 2018, restricts the Houthis’ ability to finance imports outside the formal banking system, and decree No. 49, signed in July 2019, requires importers to pay customs taxes to the Hadi government before entering Hodeidah ports.
While the decrees appear to have slowed the flow of Iranian-procured oil reaching the Hodeidah ports and reduced Houthi tax revenues from other importers, they’ve also exacerbated fuel shortages in Houthi-controlled areas by blocking or delaying fuel tankers for weeks at a time. The Houthis have retaliated by turning away tankers that have complied with the government decrees.
Another front in the economic war involves the Central Bank of Yemen, which has been split along the conflict’s battle lines between Hadi’s government in the interim capital in Aden and Houthi-held Sana’a since 2016. A Houthi ban on new banknotes issued by the bank's Aden branch in December has deepened divides in the financial sector.
Ibb governorate, about 200 kilometers south of the capital Sana’a, has been one of the testing grounds for taxing the populace. With one of the largest populations in the country, at more than 3 million, and a growing urban center that has been largely insulated from open conflict during the war, Ibb represents a potentially significant source of tax revenue.
In the governorate’s capital, Ibb city, the Houthis recently introduced what they call “tax completion” for merchants, shopkeepers and real estate owners, according to residents, who describe it as a 50 percent tax added to their overall tax bill.
Mohammed Mansour, a spice shop owner in downtown Ibb, told Almasdar Online he was recently charged 225,000 Yemeni rials ($375*) in income tax, which included 150,000 rials ($250) in tax and 75,000 rials ($125) for tax completion.
Business taxes are often calculated during visits by the local tax official and a “supervisor,” a senior Houthi official assigned to oversee particular districts, neighborhoods or government departments. Based on an arbitrary assessment of what a particular business is worth, the authorities issue a tax bill, as in Mansour’s case. Business owners who refuse to pay are threatened with referral to another Houthi supervisor in the tax office, who charges twice the approved amount, he said.
"In the midst of the crisis, where some businesses have come to a halt, we can’t manage the expenses of our houses or pay the rent of our shops,” Mansour said. “They are taking our money in the name of taxes," he said.
Tax completion is one of many taxes imposed by Houthis since the group seized power in 2015. Some, like the taxes that fund public services including garbage removal and street cleaners, are legitimate. Others less so. Mansour has a collection of receipts documenting the payment of various Houthi-imposed taxes, such as the Prophet's Birth, Martyr's Day, Al-Ghadeer, Al-Welayah, Allegiance, and Sept. 21 (the anniversary of rebels’ coup d'état in Sana’a in 2014).
“What can we do?" he lamented. "The rule of the strong over the weak, stealing and plundering people's money,” he said. “Who can we complain to about this injustice?”
Property owners in Ibb city told Almasdar Online the Houthis charged 250,000 rials ($375) in real estate tax. One landlord, who asked to remain anonymous, said Houthi authorities extracted additional taxes and fines from him after paying the agreed upon bill.
"I paid 250,000 rials in income tax, but they gave me a receipt for only 180,000 rials ($300) plus a fine of 7,200 rials ($12), which means the amount of 63,000 rials ($105) was unaccounted for in the receipt” he said, adding that the collector concealed his identity on the receipt by signing it with a nickname ‘Mujahid’. The term is used by the Houthis, as well as Al-Qaeda, to describe fighters with religious motives.
The imposition of income taxes on traders and real estate by Houthi comes in the context of expanding their revenues, according to economist Abdul Wahid Al-Awbali.
"The Houthis’ income taxes are a series of organized and systematic looting of the money of merchants and property owners,” he said. “They impose income taxes as they wish, and they use only the name of law in the process," he said.
Al-Iryani sees the Houthi tax push as an effect of the broader economic war being waged between the Saudi-backed Hadi government and the Houthis.
This weaponization of the economy has led groups to seek new ways to generate revenue.
“They’ve been weaponizing the economy for a long time, but now it’s just more aggressive,” said. “What that results in is the Houthis turning to the general population and squeezing them for more fees and taxes – when the economy is weaponized, both sides increase pressure on the population.”
*All currency conversion are calculated using an exchange rate of 600 Yemeni rials per $1 US dollar in Houthi-held areas.