@revenuewatch #yemen case study (2008)

8/3/2019 @revenuewatch #Yemen case study (2008)

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Transparency in Revenues Project

Yemeni Case Study


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Introduction:

Revenues are deemed to be the basic foundation in the process of planning

and formulating any State policy for economic and social development.When the outcome of revenues is high, it helps increase spending on

investment and operational activities and boosts the national economy. In

addition to this, the volume of spending on future government activities

depends on the size of revenues. In case there is any waste or manipulation

of such revenues, the impact will be reflected on the services provided by

the government to the society and this impact will extend to future

generations, which makes the government search for loans to cover

shortfalls in income and bear the current as well as future burdens.

There is a clear link between the management of public funds on the one

hand, and the principles of democracy on the other hand, since the granting

of confidence to the government by the parliament is based on proposed

policies and priorities. Also the legislation that implements these policiesshould come through the legislative authority which is the parliament, and

the executive authority should provide the necessary funds to implement

policies through the imposition of taxes and allocation of funds.

And there must be a clear mechanism for providing transparency and

effective accountability because it will support the legislative framework

under which the tax is imposed or allow companies to extract state

resources of oil and minerals. This mechanism will bear the executive

authority the burden and responsibility for providing adequate reports that

are transparent in its role in enforcing revenue collection and use of public


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funds and application of policies and priorities agreed upon, and submitting

it to the peoples representatives in the Parliament.

Doing a good job in this regard ensures effective accountability and gives

citizens confidence in the integrity of their government and contributes in

finding an environment conducive to stability and economic growth, while

the absence of such mechanism and the lack of transparency and financial

information deprive voters and their representatives from their power, and

lead to loss and waste and bad use of public funds in addition to the lack of

confidence in public institutions and hostility towards the government and

undermine economic growth.

This study aims at shedding light on parliamentary control over revenues in

the Yemeni Republic through the constitutional right of parliament to

impose taxes or to approve on the agreements to extract oil or to control the

general budget, while going through the degree of availability of the

principles of financial transparency in the submission of the general budget,

which includes revenue transparency. The present study will also go

through the provided means and the procedures used in the control of

revenues. Finally, some suggestions will be made to help strengthen the

capacity of parliaments members in the control of budget including

revenues and achieve the desired transparency.

Objectives:

The paper aims to achieve the following objectives:

1- Identifying the role of the Yemeni parliament in the control of public

revenues.


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2- Identifying the availability of the principles of financial transparency

in public revenues in the Yemeni Republic.

3- Strengthening the oversight role of the members of the Parliament

and their ability to control revenues in accordance with the powers

granted to them in the adoption of the general budget.

Degree of importance:

The importance of the present paper stems from the importance of public

revenues and from the paramount importance of public revenues in

financing the development of economic and social plans in any society and

in any country.Also public revenues in the Yemeni Republic play an important role in

financing and implementing plans for economic and social development,

and therefore this paper will focus on the ability of the Yemeni Parliament

to control public revenues through all the means which are guaranteed by

the Constitution and laws, as well as to identify the availability of the

principles of financial transparency issued by international bodies and

organizations who are specialized in Yemeni public revenues.

Problems:

The problems are shown in the following questions:

1- Does the Yemeni Parliament have the ability to control public

revenues? What are the means used to achieve this?

2- Are Public revenues displayed and disclosed in the public budget in

line with the principles of financial transparency issued by concernedinternational bodies and organizations?

Methodology:

Researchers have followed the inductive and deductive research

methodology (indicative). The inductive method is used in the so-called

library discussion of constitutional and legal rules that govern the


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imposition and control of revenues, and the bases and criteria that

determine the transparency in the estimated revenues, in addition to the

books and studies related to budgets.The deductive method applies through the use of financial statements on

revenues issued by government agencies for the years 2005 and 2006 and

in 2007, and then analyzes those data in order to achieve the objectives of

the research, while seeing to consistency and the practical applicability.

Contents of the report:

The report consists of three basic sections. The first section is a review of

the history of democratic experience in Yemen and its influence on

financial policies related to the economic and financial reform in Yemen, in

addition to the macroeconomic indicators and the kinds of revenues and

their evolution in Yemen.

The second section covers the legal and institutional framework for the

control of revenues from a legal perspective and the agencies and

institutions responsible for the revenues like ministries, government

departments, institutions and bodies and the other entities that influence

revenues, as well as those who control revenues like the parliament, the

Ministry of Finance and its branches and the Central Body for Audit and

Accounting.

The third section deals with the policies and the practical measures used to

assess revenues and control in terms of structure, itemization and analysis

of revenues in the Yemeni Republic to review the application of legal texts

and scientific standards, and the recommendations and proposals of


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relevant international organizations, as well as the relevance of data on

revenues and information provided to the parliament.

First Section

Yemens democratic experience and its implications on fiscal policy

-Yemens democratic experience

- Economic and fiscal reform in Yemen

-Yemens Economic situation and economic indicators over the past years

Democratic experience in Yemen

The Parliamentary experience in Yemen is old it goes back to the

establishment of the first national Council in the then so-called Yemen

Arab Republic (North Yemen) in 1969 by a presidential decree. The

number of members appointed was 45, they were elite of scholars, sheikhs,

and intellectuals in the Yemeni community, the number of committees was

7, and the most important ones were the committee of Finance, the

committee of Economy and the committee of Transport. As the first

president of the Council says, the role of the Council was to consolidate the

national foundations of the state as well as to draft the Yemenis ArabRepublic Constitution (Sheikh Al Ahmar: 180-183), and the council lasted

for two years. On February 25th

1971 a Council of the State (Shura

Council) was formed, the country was divided into districts and the number

of the members of the Council was 159, 128 were elected by acclamation

while the rest i.e. 20% of the total members of the Council were appointed


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by the Head of State according to the Constitution (Sheikh Al Ahmar,

2007: 197-198).

The Council discussed a number of laws relating to various sectors like

politics, services, the establishment and the monitoring of the various

bodies of the State. The committees of the Council were 14 and the most

important ones were: the Oversight and Follow-up Committee, the

Committee of the Plan and Financial and Economic Affairs, and the

Committee on the Property of the State (the location of the Yemeni

Parliament).

The Shura Council was frozen and the Constitution was suspended by

decision of the Council of Command on June 14, 1974 till 2/6/1978, and

after this date the Parliament was formed by the constitutional statement

no.1 of 6/2/1978 by the Council of Command, and consisted of 99

members and lasted about 10 years. It was considered as the first elected

Council in the Yemeni parliamentary life where the parliament supervised

the election of the Shura Council on July 6, 1988 and held its first meeting

on July 12 of the same year. The meeting was attended by 158 members of

the Council where 120 members were elected while there were members

appointed under the Constitution. The number of committees was 15, and

although the Constitution prohibits the political parties in Yemen, the Shura

Council elections produced different political orientations and the most

important were the Muslim Brotherhood and the Arab Nationalists. The

Democratic Republic of Yemen (formerly the southern part) took its

independence on November 30, 1967. The first Constitution was approved

and came into force on November 30, 1970. On the light of this

Constitution the first parliament in the Yemen Peoples Democratic

Republic was formed and it was known as the provisional Supreme

Parliament, a Council which was appointed and not elected.


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After the formation of the Yemeni Socialist Party in October 1978, the first

general elections were conducted on December 1978 by secret ballot,

which resulted in the formation of the first elected parliament in the Yemen

Peoples Democratic Republic. The functions of the Council consisted of

the following: The Parliament approves the basic working rules of the

governing body, the Council of Ministers and the Supreme Court. The

Council shall safeguard the by-laws and the interest of the people, shall

approve the flag, the emblem and the national anthem of the Republic, and

shall declare a general mobilization and organization of the military service

duties in addition to the general principles for the organization of national

defense. Only the Parliament shall be competent in the following issues:

After the unification of Yemen in May 22, 1990, democracy and formation

of parties became a prerequisite for the Yemeni regime. The two chambers

which existed in the two halves during the transitional period were merged

as provided in the third paragraph of the Declaration of the Republic of

Yemen and the organization of the transitional period. During this period

the Parliament had to be formed from all the Shura Council members inaddition to 31 members appointed by the Council of Presidency. The

Parliament shall exercise its full power as set forth in the Constitution. The

number of the Councils members was 301, 159 were members of the

Shura Council and 111 members of the Supreme Assembly, 31 are

appointed members by decision from the Presidency Council. The Council

held its first meeting on May 26, 1990 where the opening session was

attended by the President and the members of the Council.

The elections were held on party basis in 1993 and there was a fierce

competition among the political forces. Two sessions were conducted after

the first elections, one in 1997 and another in 2003. The Constitution

granted legislative and monitoring powers to a large extent. Articles 2, 3


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and 4 assigned the enactment of laws and legislation to impose taxes, fees

or for sales of state property. Besides, the agreement between Yemen and

Oil Companies, which determines the proportion and distribution of profits,

would enter into force only after its approval by the Council. The

Parliament has played a major role in the abolition of the agreements

between the government and some companies, one of the most important

was the cancellation of the sale of a part of the Yemenis company share in

sector 53 as well as canceling the extension of the American Hunt

Agreement sector no. 18 Marib.

The Constitution and the laws gave powers to question ministers and heads

of economic institutions of the State, as well as the adoption of the budget

after its submission to the Parliament who would discuss it and make

recommendations to the government, without however having the right to

amend the budget figures. The Parliament also reviews the final accounts

of the state, controls the public economic institutions in addition to local

and supplementary funds as well as the states economic plans.

Parliaments play a significant role in monitoring the work of government

bodies because of their high representation at the national level.

Parliaments and members shall make great efforts to safeguard the funds

and resources of the state, to ensure a fair distribution and sharing of the

taxation burden.

Economic and Financial Reform in Yemen

Yemen has witnessed in the early nineties of the last century unexpected

changes due to two main factors: the re-unification of Yemen in May 1990

and the consequent high costs on the economy, in addition to the Gulf War


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II (1990-1991) which resulted in the return of nearly 800 thousands

Yemeni migrants, and the wrong policies pursued by the Government in

meeting the wishes of many party leaders. Besides, each party wanted to

recruit its own supporters, which resulted in the collapse of the national

currency and increase in printing money without studying its inflation

implications. This was followed by the war of 1994 which led to huge

economic difficulties and led Yemen to the brink, forcing the government

to adopt a comprehensive reform program.

The Yemeni government has sought to address economic imbalances

through the adoption of the economic, financial, and administrative reformprogram in 1995, which was a key factor in achieving economic stability,

revitalizing the economy, increasing income and providing new job

opportunities. The five-year plan for economic and social development

1996-2000 adopted all the economic, financial, and administrative reform

elements.

Fiscal Policy reforms and enhancing the efficiency of the general

budget:

Linking financial policies with macroeconomic variables.

Continuing the process of development and modernization of

financial legislations.

Continuing the work on the project to computerize the

government financial system and internet connection.

Reforming the system of public tenders through the approval by

the Parliament of the law on public tenders and the formation of

the Supreme Committee for tenders.


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Adopting the sales tax law and introducing some amendments to

the production, consumption, and services taxes.

Establishing tax courts in both Sanaa and Aden.

Updating the system of customs through computerization.

The Yemeni economic situation and economic

indicators over the past years:

The Yemeni economy has witnessed over the past three years a range ofcomprehensive economic and social developments that came as a result of

the oscillating government policies. However, the government says that this

policy is consistent with reform programs and economic policies for

performance improving, so as to achieve the development goals contained

in the third plan of economic and social development 2006-2010 to reduce

poverty and which included various aspects of development activity

drawing on a range of strategic visions in addition to the supreme national

objectives contained in the Yemens Strategic Vision 2015; The economic

Reform Program; The Millennium Development Goals 2015; The

Economic, Financial, and Administrative Reform; The National Reform

Agenda aimed at accelerating the pace of national reforms, improving the

investment environment, promoting and developing cooperation with

development partners and moving towards the accession to the Cooperation

Council for the Arab Gulf States.

This paper will review the most recent efforts and developments in the

Yemeni economy during the previous period:


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First: The macro-economic performance indicators:

1.The evolution of Gross Domestic Product (GDP):

Data on economic growth show that real GDP has achieved a growth rate

of 5.6% in 2005. Then it declined during 2006 and 2007 at an annual rate

growth of (3.2%) (3.6%), and this is attributed by the government to lower

oil production.

Source: The governments report submitted to the Parliament on 18/2/2008

Domestic and foreign private investments have seen a sharp drop from

49.4% of the total investment to 45% (Governments report to the

Parliament on 18/2/2008).

The trends of economic growth and its structural composition show that the

oil sector was still contributing in around 33% of the average GDP during

2005-2007, which clearly shows the great importance of oil contribution in

economic activity and the dependence of national economy on oil

2007 -2005 Growth rates of real GDP for the period 2005-2007

-15

-10

-5

0

5

10

2005 2006 2007

%

GDP at market prices GDP non-oil sector

Gross Domestic oil and gas sector


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revenues; all this makes the economic situation depend on fluctuations in

the quantities or prices of oil or both.

Due to the great importance of the oil sector in GDP, the expected decline

in oil production and thus the governments share of it in the medium term

will have a significant adverse impact on economic growth rates, as well as

oil revenues in the state budget which would affect the level of public

spending, both current and investment. The increase in domestic

consumption of petroleum products in light of the declining oil production

will lead to a sharp decline in export revenues, and thus to a deterioration in

the trade balance and in the position of the current balance of payments.

Source: The governments report to the parliament on 18/2/2008

Table no.1 shows the most important sectors that constitute the non-oil real

GDP for 2005-2006 (by million Riyals)

StatementRealPrimary RealGrowthrate%

Quantities of crude oil production

146.0133.4

117.1

0

50

100

150

200

2005 2006 2007

) Quantities of crude oil production (million barrels)

(


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2005200620052006GDP of non-oil sectors including:2777082908296.524.72

Agriculture, forestry and fishing61322636042.413.72Fishing25252387-

10.08-5.47

Manufacturing industries (without refining)44950472788.085.18

Extractive industries (without oil)150116025.486.73

Electricity and Water396942277.156.50

Construction630366424.515.38

Wholesale and retail trade21955237833.478.33

Restaurants and Hotels238524473.252.60

Transport, storage and communication40940449609.129.82

Producers of government services60867628516.633.26

Source: Central Bureau of Statistics

2. The structure of GDP:

The table above shows the GDP at constant prices for the year 1990. It also

shows that the change in the structure of GDP in 2006 was evident, since

the proportion of oil and gas sector declined from about 12.1% in 2005 to

about 10.8% in 2006, and in current prices to around 35.6% in 2005 and

around 28.3% in 2006. This was due to the low growth rate of GDP in

terms of oil extraction at fixed prices and the decline in the amount of oil


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production by about -8.3% in 2006 (Governments report to the Parliament

on 18/2/2008).

In contrast, non-oil sectors increased at constant prices from about 87.9%

in 2005 to 89.3% of the GDP in 2006. Such improvement in non-oil sectors

occurs at the expense of the oil sector, with Wholesale and retail sector

increasing from 7% in 2005 to 7.3% in 2006; Transport, storage and

communication sector, from 13% to 13.8%; Manufacturing sector from

14.5% to 14.8%; in addition to agriculture, hunting and forestry from

10.6% to 10.9% of GDP during the same period.

Governments report to the Parliament on 18/2/2008

Second: Poverty, unemployment and economic growth:

The results of the poverty survey in Yemen 2005/2006 indicated that

economic growth had directly contributed to the reduction of poverty. The

population poverty rate fell from about 41.8% to about 34.8%. The

proportion of people suffering from food poverty (extreme poverty)

Contribution of oil and non-oil products in GDP at current prices%

0

10

20

30

40

50

60

70

80

2005 2006 2007

%

Contribution of no -oil products in the GDP

Contribution of oil and gas sectors in the GD


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Table (2) Evolution of poverty indicators inYemen over the period 1998-2006

2006 1998 Statement

7.3 6.9 Number of poor

(million)

34.8 40.1 Overall poverty

(%population)

12.5 17.6 Food poverty (%

population)

20.7 32.2Poverty in urban areas

%40.1 42.4 Poverty in rural areas

%Source: Central Bureau of Statistics, the poverty

assessment in Yemen 2006

decreased from about 17.6% of the total population in 1998 to 12.5% of the

total population in 2006. But the authors of the present paper have

reservations regarding this ratio since 85% of Yemens population lives

with less than 2 dollars per day according to the findings of the survey.

On the other hand, data indicate the decline of poverty in urban areas more

than in rural areas, by 32.2% to 20.7% of the total urban population during

the period of 1998-2006, while the decline in poverty rates in rural areas

was extremely limited, moving from 42.4% to 40.1% of the total rural

population.

Furthermore, when analyzing the sources of economic growth during 1998-2006 we noted that most of the growth came from oil and gas sectors

because the latter had achieved an average annual growth rate of up to

28.7%, while the annual growth rate of the non-oil sectors during the same

period had reached 16.1%.

Unemployment rate:

according to the Statistical

Abstract of 2006 andaccording to the census of

2004 the unemployment

rate was 16.2% (males 13%

and females 39.6%); there

is doubt about the ratio


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because of the lack of independent centers to measure the volume of

unemployment in Yemen.

Third: Financial developments1. Evolution of the performance of public revenues and grants

The percentage of public revenues to the GDP reached an annual average

of 31.3% during 2004-2007. This percentage increased from 24.7% in 2004

to 38.2% in 2006, and it fell to 28.5% in 2007, whereas the revenues ratio

to GDP dropped in a large proportion and achieved a minus growth rate of

4.3%.

It is worth mentioning that the dramatic rise of public revenues is due to the

rise of oil revenues in a significant way in the light of the sharp rise of oil

prices during 2005 and 2006, which led to:

- Oil revenues to total public revenues and grants increased from about

62.2% in 2004 to about 67.8% and 74.99% in 2005 and 2006 respectively.

Table 3: Evolution of revenues in the Republic of YemenStatementyear

200420052006*2007

Total resources and grants812,1521,110,8411,449,6781,408,927

793,4711,097,1051,434,6621,402,693


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Total resources

Total current receipts793,1671,094,0021,431,9891,402,264

Current revenues793,1671,094,0021,431,9891,402,264

Tax revenues240,163284,416266,396307,466

Current non-tax revenues553,004809,5861,165,5931,094,798

Oil and gas revenues505355

774,5361,087,059977,531

Current external grants0000

Capital revenues30431032,673429

Foreign aid capital18,68113,73615,0166,234

Total expenditures and net lending867,4971,169,2421,403,9661,748,424

The proportion of resources to

GDP24.734,238,228,5

The proportion of tax revenues to

income and grants29.625.618.421.8

The proportion of non-tax

revenues to the revenues and

grants68.172.980.477.7

The proportion of oil revenues to

the revenues and grants62.269.774.9969.4

Source: Government finance statistical bulletin number 31, the 1st

quarter of 2008.The share of tax revenues to total public revenues and grants has witnessed

a significant decline, moving from 25.6% in 2005 to 18.4% in 2006, and

21.8% in 2007. Then the ratio of tax revenues to the GDP declined from


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8.7% in 2005 to 6.9% in 2006 and 6.2% in 2007; this is a serious decline

compared to the Arab Countries that have similar conditions to Yemen.

2. Sustainability of public finances in light of declining oil

production:

The imbalance of public finances will be one of the major challenges in the

forthcoming period due to the negative impact on financial stability in light

of oil revenues deterioration, and the weak growth in tax revenues with the

successive increases in current expenditures. This would widen the gap

between income taxes and running costs as it appears from the comparison

between both growth rates. Besides, the ongoing deterioration of oil

production, the decrease of oil revenues, the limited tax revenues, the

increasing public expenditures and future commitments will lead to an

increase in the budget deficit and will widen the financial and monetary

imbalance.

3. Fiscal and non-oil deficit:The percentage of public budget deficit to the GDP was 2.2% and 1.7% in

2004 and 2005 respectively, while it turned into a surplus of 1.5% in 2006.

The deficit in 2007 was estimated at 5.9% of the GDP, but the non-oil

deficit under the assumption of oil depletion can be up to 30% of GDP; this

shows the difficult situation and the states inability to control fiscal deficit

if oil production continues to decline.


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The fiscal deficit as a percentage of GDP

The net non-surplus deficit

The non-oil deficit

Source: Governments report to the Parliament on 18/2/1998

4- The Rate of Inflation:

During the previous period, the inflation rate has witnessed a rise of about

18.5% in 2006 and a decline to 18% in 2007. The increase in inflation

came as result of a combination of factors including:

Depletion of most of the public treasury resources

due to irrational subsidies.

Inflation of over 50% due to the financing of

deficit through money emissions.

Weak economic growth, stagnation of

investments, and evasion of capital.

2007-2004

-35

-30

-25

-20

-15

-10

-5

0

5

2004200520062007

/


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Various forms of unemployment and increasing

rates to unprecedented levels.

Severe deterioration in the level of basic social

services.

Section Two:

Legal and institutional framework for the control of revenues

Introduction:

Parliaments are usually responsible for two basic tasks: legislation, i.e.

approval of laws, and monitoring the executive authority, i.e. placing all the

actions of the executive power under parliamentary oversight and

accountability. Parliaments take their power and influence practiced on the

executive power from popular legitimacy granted by elections, as well as

by the constitutional and legal framework that governs the relationship

between the states institutions.

The elected Yemeni Parliament has adopted a set of rules and traditions

embodied in the Constitution and in the Parliament bylaws, as

constitutional and legal basis for monitoring and accountability.

Constitutional and legal basis for the control of revenues:

First: The Constitution of the Republic of Yemen:

Chapter I, Part III of the Constitution provides in article 62 that the

Parliament is the legislative authority of the State which approves the laws

and policy of the state, the general budget, the balance sheet and the


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treaties. Also articles 86, 87, 88, 90, 91, 92, 93 and 94 of the Constitution

give details on the Parliaments mandate provided for in Article 62,

whereby the latter is to exercise control over the governments policy in

general and its fiscal policy in addition to being accountable in accordance

with the Constitution which stipulates that The Parliament is the elected

legislative authority entrusted with legislative and oversight functions set

out in bylaws.

In order to extend its control over the actions of the executive power, the

Parliament established committees to follow up the work of the executive

authority, and thus hold it accountable in the event of a wrongdoing.

Article 67 of the Constitution addresses the composition of permanent

parliamentary committees as provided in articles (24, 25) of the

Parliaments Statutes to discuss draft laws, proposals and issues submitted

by the Parliament or Speaker of the House. The Parliament may constitute

ad hoc committees for current or permanent purposes and for specific

objectives; those are the so-called fact-finding or follow-up committees.

The following are the introductory articles of the Constitution which set the

mandate of the Parliament:

Article (8): All kinds of natural resources, underground or land energy

resources, territorial waters or continental resources and economic

zones belong to the State, which shall exploit them for public interest.

Article (11): The law regulates the official currency of the State, thefinancial and banking system, and sets standards, weights and

measures.


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Article (12): Tax imposition and public expenditures are set while

bearing in mind the interests of the society and social justice among

citizens.

Article (13):

a- Tax is imposed, amended, and cancelled under the law and no one

may be exempted unless otherwise stated by the law; no one may be

required to pay any other taxes, fees and costs except by law.

b- Fees establishment, collection, ways of spending, modification and

exemption are subject to the law.

Article (15): The law defines the basic rules for public funds collection

and spending.

Article (16): The executive power may not contract loans, give

guarantees, or undertake a project that requires spending from the State

Treasury in the year or years to come without the consent of the

Parliament.

Article (18): Contract concessions for the exploitation of natural

resources and public utilities are only done by law, and the law may

indicate the limited cases whereby concessions are granted, in

accordance with the relevant rules and procedures. The law identifies

conditions and modalities to dispose of the state-owned real estate and

to concede movable funds, along with the relevant rules and

procedures. The law also regulates the concessions granted to local

units and the free disposal of public funds.

Article (19): The state and all the members of the society shall maintain

and safeguard public funds and state property. Any violation shall be

sanctioned by the law.


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Second: Yemeni laws governing revenues:

More than 15 laws have been enacted to regulate and control revenues,

mainly the financial law, the law on public funds collection, tax and customlaws, investment law, privatization law, the law on public entities and

institutions , the Central bank law, the law on mines and quarries, the law

on the Central Agency for Control and Audit, the land and state property

law, as well as the large number of oil agreements between the Ministry of

Oil and the International Companies for extracting oil and gas. The

following is a review of some of these laws:

1- Financial Law no. 8 of 1990, as amended by Law no. 50 in 1999: It

defines the general budget along with all supplements, revenues and

expenditures. The law shall be applicable to every administrative entity

or public institution.

2- Law no. 13 of 1990 on Public Funds collection: It identifies the state-

owned resources outlined by article 3 of the law which calls for the

collection of all kinds Zakat in accordance with the provisions of

Islamic Law unless otherwise stated by a special law as follows:

a- All direct and indirect sovereign taxes and fees, as well as

all fines, indemnities, and sanctions imposed by the relevant

law.

b- All kinds of legally authorized services fees.

c- All state property revenues and sales, agricultural, real

estate, oil and mineral resources, capital investment in public

and mixed institutions, quarries, fines, indemnities, sanctions

as well as other public properties and funds in accordance

with the law.


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d- Misuse and embezzlement of public funds in addition to

outstanding debts.

e-All loans, grants, donations, cash and in-kind contributions

to the State as well as the outcome of treasury bills and

investment certificates issued by the State; recovery of loans

granted to civil servants, individuals, as well as private or

public actors.

f- Outstanding funds of the Ministry of Endowments (Waqf),

local councils, departments, agencies or institutions that are

fully or partly dealing with public funds or with the States

collaterals. Are excluded the institutions which fall under thecommercial law for funds collection. In all cases collection is

done upon request from the relevant party.

g- All other funds to be collected in accordance with the

present law.

3- The following are tax laws:

Income tax law no. 31 of 1990 as amended by Law no. 4 of 1995 and

Law no. 12 of 1999, which identifies items and activities that are

subject to taxes or are tax exempted. Taxes are divided as follows:

- Payroll taxes, taxes on real estate rents, taxes on industrial and

commercial profits, non-commercial or industrial liberal

professions income tax, taxes on real estate sales and capital

gains.

Tax Law on consumption and production No. 70 of 1990, as

amended by Law No.4 of 1995, Law No. 14 of 1996, Law No.4 of

1997, Laws No. 13 and No. 23 of 1999: it covers imported taxable

goods, as well as taxable locally manufactured goods. It identifies

tax collection means as well as the authorities entitled to do so. This


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law was cancelled by article No. 69 of Law No. 42 in 2005 after the

adoption of the General Sales Tax Law.

The General Sales Tax Law No. 19 of 2001 as amended by Law 36

of 2002 which amended the text of article 70 of Law No. 19 of 2001

on General Sales Tax, and as amended by Law No. 42 of 2003 which

amended Law No. 19 of 2001 on General Sales Tax.

Law No. 45 of 1995 on Tax on vehicles

Law No. 27 of 1995 on Tax on the use of vehicles.

Customs Law No. 14 of 1990

Customs Tariff Law No. 37 of 1997

4- Law No. 35 of 1991 concerning institutions and companieswholly or

partly owned by the State, as amended by Law No. 7 of 1997 which

amended some articles of Law No. 35.

5- Law No. 45 of 1999 on the privatization of companies as well as public

and semi-public institutions.

6- Law No. 24 of 2002 on mines and quarries, which regulates the

extraction and investment in minerals.

7- Law No. 14 of 2000 on the Central Bank of Yemen, as amended by Law

No. 21 of 2003 which amended paragraph 1 of Article 10 of Law No. 14

of 2000 on the Central Bank of Yemen.

8- Law No. 9 of 1996 on the Zakat, as amended by Law No. 2 of 1999 on

the Zakat.

Revenues Agencies

I- Ministries and Public Departments

1- Ministry of Finance:


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All the laws governing the collection of public revenues

including Financial Law No. 8 of 1990 as amended by Law

No. 50 of 1999 and the Law on public funds No. 13 of 1990

state the following:

- All revenues collected by the State must have a receipt issued by

the Ministry of Finance with its official stamp. The use of any

other receipt is strictly forbidden (article 24 of the Financial Law)

- The Central Bank shall submit to the Ministry of Finance a

monthly statement about the General Budget actual revenues and

expenditures of each stakeholder (Financial Law, article 54)- General Directors of Financial Affairs shall represent the Ministry

of Finance to the different entities, where they are entitled to sign

the financial transactions (Financial Law, article 59). Accounts

Managers and Secretaries of Funds are accountable to the

Ministry of Finance which decides of their appointment,

replacement, or impeachment.

- At the end of each financial year the Ministry of Finance prepares

a statement with actual revenues and expenditures from the

General Budget. The statement shall be submitted to the Council

of Ministers and the Parliament for approval within nine months

after the end of the fiscal year (Financial Law Article 67)

- Text law on the collection of public funds which are to be

collected only by competent bodies at the Ministry of Finance,

other bodies from public institutions and the Ministry of

Endowments (Waqf) (Article 4 of the Law on Public Funds

Collection).

- Public revenues collected in accordance with Article 3 of the Law

on Public Funds Collection consist of the following:


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- - All direct and indirect sovereign taxes and fees, as well as all

fines, indemnities, and sanctions imposed by the relevant law.

- b- All kinds of legally authorized services fees.

- c- All state property revenues and sales, agricultural, real estate,

oil and mineral resources, capital investment in public and mixed

institutions, quarries, fines, indemnities, sanctions as well as other

public properties and funds in accordance with the law.

- d- Misuse and embezzlement of public funds in addition to

outstanding debts.

- e-All loans, grants, donations, cash and in-kind contributions to

the State as well as the outcome of treasury bills and investmentcertificates issued by the State; recovery of loans granted to civil

servants, individuals, as well as private or public actors.

- f- Outstanding funds of the Ministry of Endowments (Waqf),

local councils, departments, agencies or institutions that are fully

or partly dealing with public funds or with the States collaterals.

Are excluded the institutions which fall under the commercial law

for funds collection. In all cases collection is done upon request

from the relevant party.

- g- All other funds to be collected in accordance with the present

law.

1- Yemen Central Bank:

The Financial Law No. 8 of 1990 as amended by Law No. 50 of 1999,

and the Law of the Central Bank No. 14 of 1999, as amended by Law

No. 21 of 2003 stipulates the following:

- All revenues shall be directly sent to the Central Bank or to one of

its branches; in the absence of a branch, revenues shall be sent to


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another bank authorized by the Central Bank (Financial Law Article

26).

- The Central Bank shall open a general account of revenues and

expenditures from the States budget under the name Governments

general account- Ministry of Finance; the account shall be itemized

according to the General Budget and shall include all the revenues

collected by the State and deduct the expenditures approved by the

Ministry of Finance (Financial Law Article 38).

- The Central Bank shall notify the Ministry of Finance of the

accounts opened for each of the General Budget (Financial Law

Article 40)- Once the Central Bank opens an account for each unit of the public

sector with the consent of the Minister of Finance, the unit shall

deposit all its revenues in the account and spend from it through

checks issued by the Central Bank and its branches (Financial Law

Article 42).

According to the Law, the Central Bank is entrusted with manyfunctions (Article 31 of the Central Bank Law) as follows:

- To be the depositary of the government or the public institutions,

accept deposits, and do the payments on behalf of the government or

the public institutions.

- To open and run official and private accounts in accordance with

arrangements agreed upon between the bank and the government or

the public institutions.

- To recover any kinds of revenues in the form of assets or interests

generated by the selling of securities or any other government or

public property.

- To recover any oil and other natural resources revenues.


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3- Tax Authority:

The Income Tax Law No. 31 of 1991, as amended by Law No. 3 of 1995,Law No. 13 of 1996, Law No. 12 of 1999, the General Sales Tax Law No.

19 of 2001 as amended by Law No. 36 of 2002, Law No. 42 of 2003, Law

No. 14 of 2004, and Law No. 42 of 2005 state the following:

- An annual tax shall be imposed on the profits of the following:

(Article 3 of the Income Tax Law):

a- Commercial and services businesses and enterprises.

b- Industrial businesses and enterprises, including extractive and

manufacturing industries, transport, loading, unloading, packing

and packaging businesses and enterprises.

- Tax is applied on the profits of public and semi-public economic

units as well as on units engaged in an activity which is by nature

subject to the tax law (Article 4 of the Income Tax Law).

- Tax is applied on the profits of individuals, companies, and capital

companies engaged in commercial, industrial, financial or real estate

activities (Article 5 of the Income Tax Law).

- The tax shall be imposed among others on the profits of (Article 6

of the Income Tax Law):

a- Mediators who get commissions, brokers or any person, company,agency, or office engaged in mediation to buy or sell any type of

goods, services or financial values as well as other movables, or to

buy or sell real estate or shops. Tax is also applicable on each

amount paid for brokerage and commissions to any natural or legal

person even if the payment is for casual work. The commission


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payer should deduct the tax before sending it to the Tax Authority

Treasury in due course.

b- Individuals or companies who buy and sell fixed or movable assets

meant to be sold in return for profit.

c- While avoiding double taxation, are to be included the taxes on

residents profits that are made inside or outside the country

provided those profits are generated by country-based activities.

d- Amounts received in return for sale, lease or a concession for the

use or exploitation of any trade mark or design; the amounts paid

for copyright and publication in accordance with the Law on

Investment.e- Incomes from insurance businesses of all types; land, sea, and air

transportation businesses for residents and non-residents; interests

and commissions earned outside the country by any certified bank,

a finance company, exchange or insurance company, provided they

are generated by funds and deposits inside the country.

f- Interests, deductions commissions and interests, including those

charged by financial companies, exchangers, insurance companies,

brokers, and banks, without prejudice to the provisions of paragraph

(c) of Article 15 of this Law.

g- Any contract for commission, donation, contracting, tenders,

registration, brokerage or any similar contracts signed inside or

outside the country.

h- Profits made by residents inside or outside the country.

i- Profits made by non-residents arising from engaging inside the

country in any activity or profession or individual deal regardless of

its duration.

- The law guarantees to the Tax Authority officials access to all

taxpayers data and information as a means to calculate their taxes.


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All the states administrative and economic institutions of the public

and semi-public sector, banks and companies of the private sector,

individual enterprises and foreign companies branches must help

the Tax Authority employees have access to such data and

information (Income Tax Law Article 62).

As stipulated by Article 3 of the General Sales Tax Law and its

amendments, is subject to tax:

- The value of taxable goods and services sold by a taxpayer engaged

in trade activities.

- The value of all taxable imported goods and services.

4- The Customs Department:

The Customs Law No. 14 of 1990 and the Customs Tariff Law No. 37 of

1997, as amended by Law No. 50 of 2005, stipulate the following:

- All goods that cross the customs line are subject to the provisions of

the Customs Law and Customs Regulations (Article 2 of the

Customs Law).

- Upon goods admission and entry to the lands of the Yemen or taking

them out, they shall be subject to the customs tariffs, fees and other

valid taxes, except what have been exempted under agreements or the

Provisions of this Law or other legal texts (Customs Law Article 8).

- The Customs Department shall collect customs duties, tariffs, fees,

and other taxes, as well as fines, and compensational fees on theimported goods. It shall be entitled to seize the taxpayer movable

and immovable assets even in the event of bankruptcy; it also has

the preference over all debts except those aimed for maintenance

and legal expenses (Customs Law Article 282).


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- Tariffs and custom duties are collected in accordance with the

categories set in the Customs Tariff Schedule prepared in virtue of

the Harmonized System (Customs Tariff Law Article 1).

II-Public States Institutions:

1- Regulations:

Law No. 35 of 1991 on Public institutions as amended by Law No. 7 of

1997 regulates public institutions activities as follows:

- Public Institutions: Establishment and Objectives (Law on Public

Institutions Article 7).

- Public Institutions Capital (Law on Public Institutions Article 24).

- Sources of funding of public institutions (Law on Public Institutions

Article 25).

2- Procedures:

Public entities are financially and administratively independent institutions

which set their own production and investment policies and strategies in the

framework of a general plan supervised by a superior authority namely the

relevant Minister, in accordance with Article 7 of the Law.

Yemen Public institutions may be divided into four types:

a- Institutions whose revenues cover expenditures and accumulate a

surplus; they are independent financially and administratively, thus the

Ministry of Finance dont play any supervisory or regulatory role, neither

does it appoint the Director of Financial Affairs, the Accountant or the

Treasurer.


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In their relation with the Ministry of Finance in the provinces, public

institutions act as follows:

They submit their draft budgets to the Ministry of Finance for

approval by the budget committee and then to the Parliament as

annexes to the State Budget.

They provide a balance sheet and a certified copy of the budget as

reviewed by the Central Agency for Control and Audit.

The following are examples of public institutions:

1- Public institution for Telecommunication and its affiliates.

2- Public Electricity Corporation.

3- General Establishment for Water and Sanitation.

4- Banks and Sleeping Companies.

5- Oil Corporation and its affiliate Companies and Institutions.

B- Profit service-based public institutionsare ones whose revenues cover

the expenditures and accumulate a surplus; they are independent financially

and administratively, thus the Ministry of Finance has no supervisory or

regulatory role, nor does it appoint the Director of Financial Affairs, the

Accountant, or the Treasurer.






They provide a balance sheet and a certified copy of the budget as

reviewed by the Central Agency for Control and Audit.


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1- The Aviation Authority

2- General Authority for Investment

3- Port Authority of Yemen

C- Non-profit product and service-based public institutions whose

revenues do not cover the expenditures and do not accumulate surplus. It is

the Ministry of Finance which covers their deficit; although they are

financially and administratively independent, however the Ministry of

Finance exercises an indirect supervisory and regulatory role through the

appointment of the Director of Financial Affairs, the Accountant and the

Treasurer.






They provide their balance sheet to the Ministry of Finance.

Provide any reports or data required by the Ministry of Finance.


1- Authority of the Revolution Hospital

2- Public Institution for Radio and Television

3- Tihama Development Authority

D- Semi-public companies are partly state-owned companies with the

private sector contribution to the capital. According to Law 35 they are

subject to the supervision and follow-up by the Ministry of Finance,


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although they prepare their budgets according to the nature of their work.

The Chairman of the Board is often appointed by the government, however

they provide their draft budgets along with the balance sheets to the

Ministry of Finance, and they are audited by an independent certified

public accountant and by the Central Agency:

1- Yemen Airways

2- Yemen Bank for Reconstruction and Development

III: Institutions with influence on revenues:

1- General Authority for Investment:

Was established under the Investment Law No. 22 of 2002, as a way to

encourage foreign, domestic, and Arab capital investments in Yemen:

- Promote and regulate foreign, Arab, and Yemeni capital investments

in line with the States public policy as well as with the objectives

and priorities of the national plan for economic and social

development, in accordance with the Islamic Sharia. This applies to

all sectors except those exempted by the law (Investment Law

Article 1).

- Article 27 of the Investment Law organizes the establishment of the

institution, its headquarters, subsidiaries, executive board, as well as

its offices at the ministries and in other relevant bodies.

2- Foreign Oil Companies:

Foreign Oil companies operating in oil and gas extraction significantly

influence the public revenues of the Yemeni Republic, where oil revenues

represent a large share of the States budget total revenues.

The Ministry of Oil and Mineral Resources drafts the agreements related to

production sharing contracts with different oil companies.


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3- Geological and Mineral Resources Authority:

The Law on Mines and Quarries No. 24 of 2002 regulates the exploitation

of mineral resources as follows:

- The State owns all minerals, industrial and construction stones

located underground, on the surface, and in territorial waters. The

State has the absolute right to find, explore, and dispose of those

minerals and rocks unless otherwise provided by the present law

(Law on Mines and Quarries Article 4)

- Articles 7 and 11 of the present Law organize the issuing of findsand exploration licenses for minerals and industrial or construction

stones.

- An annual fee fixed by the Authority is to be paid in return for every

license according to financial regulations and to the licensed area

(Law on Mines and Quarries Article 13)

- Exploitation of industrial and construction stones may only take

place under a contract issued in accordance with this law and after

settlement of the fees (Law on Mines and Quarries Article 20)

4- The Sharia requirements:

The Zakat Law No. 9 of 1996 which was repealed and replaced by Law

No. 2 of 1999 regulates the Islamic Sharia obligations as follows:

- Article 3 of the Law regulates the conditions of the Zakat .

- The remaining articles identify the items and amounts to be paid for

the Zakat, as well as an income Zakat for some activities provided

for in Article 19 of this Law.

- All forms of Zakat are collected then deposited in a special account

at the Central Bank (Zakat Law Article 42)


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- Article 48 of the Law stipulates that Zakat duties and accounts shall

be subject to examination and control by the Central Agency for

Control and Audit.

5- Privatization:

Law No. 45 of 1999 on privatization organizes the privatization

process of the public sector entities as follows:

- Article 6 of this Law provides for the establishment of a

Supreme Committee for Privatization consisting of the Prime

Minister and the ministers concerned; and it also sets the

functions and terms of reference of this Committee.- Article 9 of this Law provides for the establishment of a

Consultant Technical Office by a Prime Ministers decision.

Entitled the Privatization Technical Office, it also plays the role

of Secretariat to the Supreme Committee and is consisted of a

dedicated group of professionals with higher qualifications and

experience in the specialties and fields determined by the

nature of the tasks entrusted to the Office. Article 11 defines

the functions and tasks of the Office.

- Article 4 of this Law stipulates that the Supreme Committee,

the Technical Office and the relevant ministries should abide

by some of the principles of privatization as follows:

1.To publicize the Process.

2. To protect the rights of the involved personnel.

3. To expand the ownership base.

4. To have an unbiased assessment.

5. Freedom of fair competition and prevention of monopoly.

6. Commitment to privatization timelines.


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- Article 5 of the Law defines the modalities of the privatization

process.

- Article 32 paragraph (a) states that all privatization revenues

shall go into a special fund called The Privatization Revenues

Fund, including local and foreign aids and funding for

privatization projects. An account shall be opened at the

Central Bank and be included in the budget as a separate fund

for financing economic and social development projects.

5- Obligations of donors (aids, grants and donations):

Disclosing donors commitments (grants and aids) depends on the date of

proposals submission. Some grants and aids are agreed on in advance and

thus are included in the States budget. One example is the cash grant

provided by the Netherlands and which is included in the general budget.

As for the grants and aids provided during the fiscal year, after the

preparation of the budget, an agreement is usually reached with the donors

to allocate them to specific projects.

Some donors would themselves implement the projects they offer, such as

Germany which does not provide cash but rather in-kind support through

implementing the projects instead of entrusting them to the Yemeni

stakeholders.

The Ministry of Planning and International Cooperation makes direct

negotiation with donors, while the Ministry of Finance has a limited role of

monitoring the disbursement of grants and aids and making sure that the

allocation has been granted as agreed.


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IV: Parties responsible for control on revenues:

(1) The Yemeni Parliament:

The parliament exercises control as listed previously under constitutional

and legal texts and through a number of ways as follows:

A- Means for Parliamentary control:

According to those means, the Parliament shall perform inquiries and

investigations with no direct political consequences, i.e. no sanctions on thegovernment or its members are involved. The aim is to make sure that laws

are applied properly, and that public sector institutions are playing the role

assigned to them.

Parliamentary oversight may take the form of questions, interrogations and

fact-finding commissions along with control practiced by parliamentary

committees.

1- Oversight through Parliamentary Committees:

The Standing Committees are the only means for Parliament to examine

and discuss the governments policy before a political decision is taken in

plenary meetings. The Parliament gives one of those committees the task of

following up a case within its competence to find out facts and then submit

them to the Parliament. Article 33 of the Parliaments bylaws identifies the

powers of the Committee of Financial Affairs to control the governments

from a financial perspective (see article 33). Article (50) summarizes the

right of the committees to control and follow up the governments activities

already approved by the Parliament. Paragraph (3) of the same article


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provides for following up the implementation of the general budget and the

governments fiscal policy (See article 50 of the Parliaments bylaws)

Also Article 52 recognizes the Committees right to obtain data and

information from all the ministries and governments institutions. Article

57 recognizes their right to access information and data received by the

Parliament from the Central Agency for Control and Audit or from the

public institutions and even from the other committees regarding the

implementation of activities undertaken by the Government or one of its

agencies for purposes of analysis and evaluation (See 57 of the

Parliaments bylaws).Article 92 of the Constitution and articles 135 and 136 of the bylaws gave

the Parliament the mandate to examine the agreements concluded by the

Government with external parties.

2- Oversight through Parliamentary fact-finding committees:

Fact-finding committees and hearings are a means used by

Parliamentarians for information and reporting on the governments policy.

In other words, parliamentarians seek guidance and clarifications, either

written or verbal, with regards to a public issue or an action taken by

ministries or by the government as a whole (Articles 94 and 96 of the

Constitution of the Republic of Yemen and the Parliaments bylaws)

knowing that through debate Parliamentarians not only want to inquire and

investigate but also find out about the truth.

3- Oversight through hearings:


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Article 94 of the Constitution entitled the Parliament to call for hearing

sessions as provided for by the regulations of the Standing Committees

Articles 55 and 147. It is a process similar to interrogation (with differences

in the resulting consequences) called hearing which means exchanging

opinions between the Parliament and the Government regarding an

important issue. Unlike interrogations, the discussion does not seek to

eliminate the government or the minister, but rather to settle the problem

and help develop the situation for the better (Article No. 94 of the

Constitution of the Republic of Yemen and the Parliaments bylaws). It is

an open discussion on a subject involving any members of the Parliament,

without indicting the government, and it ends either by closing the debatebefore moving to other items on the agenda, or by making a decision upon

the request of the Parliament.

4- Oversight through interrogation:

Interrogation is an investigation in the form of a discussion moderated by

one Parliamentarian (or more) initiator of the interrogation, who is assisted

by colleagues showing interest in the discussion topic and who may help in

the interrogation. It is a process of finding facts related to particular

situations in one of the executive bodies, with exchange of questions

between the initiator or/and members of the Parliament, and the relevant

parties. The minister or the Prime Minister shall provide answers knowing

that the objective behind it is to confront Government or a minister with

their political responsibilities. The interrogation may end by withdrawing

confidence from the government as a whole or from one of its ministers

(Articles 97 and 98 of the Constitution of the Republic of Yemen and the

Parliaments bylaws.


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5- Oversight through fact-finding:

The above functions may not be sufficient to achieve the Parliaments

control over the government since the Parliament needs to look at some

files or do research and investigation on some issues. The Parliament acts

in line with Article 95 of the Constitution and the Parliaments bylaws in

the formation of fact-finding committees. The Parliament may form other

committees for punctual or ongoing purposes and for specific goals.

B- Executive Power Tools for Parliamentary Accountability:

The Parliament adopted several means of accountability to deal with

problems arising in the relationships between public authorities especially

between the Parliament and the Government.

Therefore, the Parliament, in line with the bylaws and the Constitution, has

the authority to hold the Executive accountable to ensure its compliance

with the law and constitutional rules, as follows:

1- Ministerial Declaration and giving confidence to the

Government:

Discussing and approving the ministerial declaration then giving

confidence to the government accordingly is one way of holding

government accountable for its public policy, and ministers for

implementation. Article 86 of the Constitution which corresponds to

Article 151 of the Parliaments bylaws recognizes the principle of having

the Prime Minister provide a program to be subject to voting in the first

meeting of the Parliament and after discussing the ministerial declaration

which sets out the governments program and policy. The Parliament shall


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vote for confidence before the Ministers are allowed to exercise their

functions.

2- The Budget:

Discussion and approval of the State Budget and its supplements are one of

the most important mechanisms of parliament accountability. They help

control the government's general policy, give it guidance by amending its

agenda, prioritize the development of given sectors, or monitor and

examine the implementation process. Government cannot spend off the

budget without resorting to Parliament.

The Parliament adopts the general budget law to be approved by the

President and published in the Official Gazette. The Parliament complies

with Chapter III of the bylaws articles 168 to 174 and the Statutes articles

88, 89 and 90 regarding the approval of the public budget and its

supplements. Those are the same provisions of Financial Law No. 8 of

1990, and the Law on Public Funds Collection No. 13 of 1990 for

organizing the public budget and financial matters. The adoption of the

draft general budget every year shows the imbalanced relationship between

the executive and the legislative.

3- Periodic Reports:

Those are the reports regularly submitted by the Government on the

progress of its work. The Parliament discusses those reports to identify any

deviations by government from its program or from its commitments

before the Parliament. Article 57 of the Parliaments bylaws requires from

the Central Agency and the government to submit detailed periodic reports.


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4- Balance Sheets:

Article 91 of the Constitution, Article 176 of the Parliaments bylaws, and

Article 67 of the Law on Finance No. 8 of 1990 call upon the executive

power to send the budgets balance sheet to Parliament within a period not

exceeding nine months after the end of the fiscal year. The balance sheet

shows the actual revenues and expenditures from public funds.

5- Reports of the Central Agency:

Articles 177 and 178 of the Parliaments bylaws recognize the right of the

Parliament to receive the report of the Central Agency for Control and

Audit and discuss it simultaneously with the submission of the States

Balance Sheet. Article 179 gives the Parliament and any of its members the

right to have any other private or public reports from the Agency on a

given topic.

6- Approval of agreements and loans:

Requesting the executive authority to send the concluded agreements and

loans obtained to the Parliament for approval is considered as a tool to hold

the government accountable for any future obligation resulting from an

agreement or a loan, in accordance with Article 16 of the Constitution

which provides that "The Executive authority may not contract an

agreement or project which involves spending from the States Treasury in

the year or years to come without the consent of the Parliament."

7-Approval of general taxes and fees:


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According to the Constitution, taxes may be imposed and approved by a

law. Article 13 of the Law provides that imposing, amending, or cancelling

general taxes and fees may be done only by law and no one is exempted

from performing all or some of them, unless otherwise stated by the law.

Also Law No. 13 on Public Funds Collection of 1990 states in Article 23

that "taxes and fees may be imposed only by law."

The accountability mechanism here requires from the government to resort

to Parliament in case it needs revenues for the State Treasury. It has then to

justify the imposition of this new tax and identify the goals behind it.

8- The National Development Plan:

Article 87 of the Constitution along with articles 180, 181, and 182 provide

for the modalities to be followed by the Executive regarding the

preparation and approval of the development plan. It is a tool to hold the

government accountable regarding the five-year development plan. The

Government has to go back to Parliament to identify the development

orientations and priorities over the coming five years.

9- Petitions and complaints:

Complaints and petitions directly submitted by the public to Parliament or

to its specialized committees are a major accountability tool that sheds light

on any shortcomings in the performance of the Executive. It is an important

mechanism to safeguard good relationships between the Parliament as an

elected body, and thus the deputies as individuals, and their constituencies.


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The Parliaments bylaws include three articles (167,166 and 165) which

organize this process, i.e. the right of every citizen to present a complaint

or petition to Parliament. They also set the formalities and ways of

receiving complaints and petitions by the Parliament as well as the actions

taken by the Speaker of the House once the legal requirements are met. The

complaints or petitions shall be forwarded to the Office of Complaints or to

the Parliaments specialized committees. The Office of Complaints decides

in a report to the Speaker of the House what to send to the Ministers and to

the competent authorities and what to reject. The Speaker of the House

shall notify the plaintiff of the actions taken.

C- Parliamentary accountability:

The Yemeni political system has adopted the means to hold the Executive

accountable to Parliament, which controls its actions and verifies its degree

of commitment to implementing the approved public policies, to managing

the state and society affairs in line with applicable laws and constitutional

rules, but also whether there is power abuse, or exaggeration in giving

priority to social groups or regional entities at the detriment of others.

Bylaws entitle the Parliament to withdraw confidence from the government

or from its members, knowing that interrogation is one of the means of

accountability, and is organized by articles 156 to 164 of the Parliaments

bylaws.


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2- Ministry of Finance and its branches in the provinces:

The Ministry of Finance plays central role in controlling the revenues (and

expenditures) of the States administrative entities (i.e. ministries, and non-

profit service departments) by supervising the preparation and the

implementation of the States budget.

The Ministry of Finance appoints the Director of Financial Affairs, the

Accountant and the Treasurer in each of the administrative public entities.The latter shall submit to the Ministry of Finance all required data in the

form of monthly, quarterly and annual statements.

This also applies to the Head Office of each entity.

As for the branches of the Ministry of Finance in provinces, they have the

limited role of compiling statistical data and informing the branches of the

States administrative entities in provinces about their appropriations of the

budget.

However, the direct control of those entities was given to the local

authorities in the provinces.

Despite the presence of an accounting entity in each province, headed by a

Director General appointed by the Ministry of Finance, it has only an

executive role since the oversight function was given to local authorities in

the provinces according to the Local Authority Law No. 4 of 2000, as

amended by Law No. 71 of 2000, and Law No. 25 of 2002.


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3- Central Agency for Control and Audit:

The Agencys work is organized by Law No. 39 of the Central Agency for

Control and Audit:

- Article 3 defines the nature of the Agency, its headquarters, and its

affiliation; Article 4 defines the objectives and terms of reference; Article 5

defines the types of control exercised by the Agency; Article 6 defines the

entities subject to the control of the Central Agency for Control and Audit.

- The Agency controls revenues and expenditures by auditing and

inspecting documents, books, and records, to make sure that the financial

and accounting procedures related to collection, disbursement, or payment

have been done correctly and in accordance with accounting and financial

regulations and laws (Article 7, paragraph (a) of the Agency Law).

- The Agency examines revenues resulting from actions related to public

funds actions and discusses the ways of use, exploitation and placement in

order to ensure the efficiency of the methods used and make sure that they

comply with the existing laws and regulations (Article 7, paragraph (e) of

the Agency Law).

- The Agency examines loans, advances, aids and credit facilities

contracted by the State or one of the entities subject to control by the


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agency. It checks the relevant documents, contracts and agreements and

makes sure that they are written in the books and records.

The Agency shall first make sure they were sent to the Public Treasury and

verify the effectiveness of their use in specified areas. Second it makes sure

that the Principal and its interests were sent to the Public Treasury on time

and according to conditions listed in the relevant contracts and agreements

(Article 7, paragraph i of the Agency Law).

- The Agency examines grants, donations and contributions from or to

domestic or foreign parties to ensure compliance with the existing laws andregulations, as well as with rules and conditions contained in the relevant

contracts and agreements (Article 7, paragraph (j) of the Agency Law).

-The Central Agency for Control and Audit exercises its regulatory

functions through its agents who are sent to the various entities to inspect

and review all carried out processes, to verify them with supporting

documents, and make sure that they are not in violation of the existing laws

and regulations.

Third section

Fiscal Policy to estimate and control revenues

Criteria and guidelines for the estimation of revenues

The structure and classification of revenues in the Republic of

Yemen and conformity with international transparency standards.


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Revenues data and information provided to the parliament.

First: Criteria and guidelines for the estimation of revenues:

There is a growing interest in the relationship between good governance

and economic and social growth; besides, transparency which means to

publicize policies objectives, contents, formulation and application, has

become an essential element of good governance. Budget is considered to

be the most important document issued by the government about its

policies, where the objectives are stated in specific and clear terms.

Therefore, transparency in preparing the budget means the disclosure of allfinancial information related to budget in a systematic and timely manner.

Besides, a full knowledge of the financial situation and thus the absolute

transparency in the presentation of the budget items is not there only for

economic purposes, but more importantly, for additional political

accountability to regulatory, legislative and public authorities.

Transparency is one of the main factors which allow the Parliament and

citizens to control and hold the government accountable. Before discussing

the issue of revenue transparency in Yemen, we have to address some of

the terms related to the concept and principles of fiscal transparency, as

well as transparency in extractive industries and a number of international

basics, criteria and guidelines for transparency in revenues. Public revenues

in the Republic of Yemen play an important role in financing and

implementing economic and social development plans. Showing interest

and having knowledge of the criteria adopted by the government is one of

the main functions of the Ministry of Finance which was assigned, by the

Constitution and the law, with the task of setting the procedures and

grounds which will reflect this task and at the same time enable the

Parliament to control public revenues through all the means provided for by


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the Constitution and the laws in force. We will try to identify the principles

of fiscal transparency that were issued by the competent international

organizations in terms of public revenues in the Republic of Yemen.

Transparency and Accountability:

Transparency means a commitment to provide truthful information free

from any misleading statements that may be used by some officials out of

corruption, or to evade responsibility or accountability.

According to the definition of the United Nations Development Program onGovernance in the Arab States (POGAR), transparency is a phenomenon of

sharing information and acting in a clear and open way. Transparency

means a free flow of information, which allows the collection of sufficient,

understandable, and controllable information in addition to protecting the

interests of the people concerned. Transparent regimes have clear

procedures for decision-making in general, they also have open

communication channels between the stakeholders and the officials, and

they put a wide range of information at the disposal of the public.

Thus, transparency requires the provision of timely, accessible,

documented and necessary information to everyone. They should be

regularly publicized in order to widen the scope of participation,

accountability, and corruption control on the one hand, and to help make

the right decisions in public policies on the other hand.

Transparency and accountability are fundamental pillars of good

governance along with empowerment, delegation, and participation, good

governance of institutions being a concept which consists of delegating by

the community the powers of command to smaller representative bodies


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that must be accountable; it also consists of effectively and actively

involving the community in decision-making, and enabling the largest and

most marginalized sectors to participate, as well as giving access to

information, tools, and ways to achieve it.

Therefore, transparency is a requirement to ensure the optimal use of public

resources, and is a means to attract investments, to reduce economic risks

and to enhance confidence in the state.

Fiscal transparency:

The IMF has defined fiscal transparency as the right of the public to

access information about the structure and functions of the government as

well as the intentions and objectives underlying the public finance policies,the public sector accounts and public finance projections (Dr. Jubran,

Transparency and Disclosure in the State Budget- p.6).

Principles of Fiscal Transparency:

Many principles that help practice fiscal transparency were issued by

several bodies so far, namely those issued by the Interim Committee of

the Board of Governors of the International Monetary Fund in its 50th

session held in Washington on 16/4/1998, entitled the Charter of Good

Practice in the area of public fiscal transparency. It included four

principles: (IMF)

The 1st

principle- Clear roles and responsibilities:

There should be a clear distinction between the public sector on the one

hand and the rest of the economic sectors on the other hand. Also the

role of public sector policy and management should be disclosed to the

public. Besides, a clear legal and administrative framework should be

established to manage public finance.

The 2nd

principle- Providing information to the public:


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Full information must be available to the public about former, current

and expected activities of the government in the area of public finance.

There must be a commitment to immediately publish information on

public finance.

The 3rd

principle- Preparation, implementation and reporting

on the General budget:

The general budget documents should mention the objectives of

public fiscal policies, the macroeconomic framework, and the

foundations of economic policies underlying the budget, and the

main risks that can be identified in relation to public finance.

Moreover, the general budget data must be displayed in a way

that would help analyze the economic policy and promote the

principle of accountability. It should also clearly define the

procedures of implementation and monitoring of the approved

expenditures and the revenues collection; besides, the legislature

and the public should have access to public financial statements

on regular basis.

The 4th

principle- Ensure the accuracy of information:

Public finance date should comply with quality standards.

General financial information should also be subject to

examination by independent parties.Transparency has become one of the most important components

of any modern budget as seen by the World Bank (Parliament,

Budget, and Gender- p.17).


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Extractive Industries Transparency:

When examining the principles and standards of transparency, that all

international, regional, and local organizations are calling for, there appears

to be a clear consistency between the principles of Fiscal Transparency and

those of Extractive Industries Transparency (EITI), as well as the calls

adopted by the World Bank Group and other organizations about the

transparency of revenues and expenditures (payments) related to extractive

industries and other assessment practices of transparency in rich countries

especially those related to resources or through other relevant initiatives

which help establish better standards for revenue transparency.

The World Bank has endorsed and supported the application of

transparency in revenues from the payments made by Extractive Industries

to governments, for this initiative is essential to improve the public

administration. The World Bank will respond effectively to promote the

transparency in revenues of extractive industries, and it strongly supports

the initiative of Extractive Industries Transparency launched by the United

Kingdom Government last year to promote the transparency of revenues in

industries. Besides, the World Bank expects the adoption of transparency in

revenues as a prerequisite for new investments in the extractive industries

sector (World Banks response to the publication of Extractive Industries

Transparency Initiative, 2004).

The IMF publications pointed out that the Guide on Resource Revenue

Transparency should follow the structure of the Charter which defines

transparency in terms of (1) defining clear roles and responsibilities, (2) the

right to access information, (3) the general budget preparation, execution,


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and reporting results, (4) the guarantee of objectivity (Guide on Resource

Revenue Transparency, 2005).

T

@revenuewatch #yemen case study (2008)

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