On a global scale, remittances are one of the most important financial flows to economic development. The World Bank has found that remittances have reached $414 billion globally, and expected to cross the $500 billion by 2016. This massive amount of money flowing across borders has lead many academics and policy makers to dream up ideas of ways to harness remittances to help develop their countries. In particular, Eritrea has decided on a more proactive and heavy-handed strategy, specifically by taxing their diaspora community as if they were their own citizens. By using strong-arm tactics and threats to the families of the Eritrean expatriate community, Eritrea’s government is trying to expropriate their money.
What has become known as a diaspora tax is a 2% income tax imposed by Eritrean consulates in various cities around the world. This is usually assessed with forms to list monthly or yearly income going back to Eritrean independence in 1993. Unpaid taxes are expected to be paid after a person’s 18th birthday, with students even expected to contribute at least ₤50 ($84). One man in 2012 was demanded to pay 600 euros in “arrears” to visit his mother, and then 800 euros to visit a seriously ill brother. The retribution for failure of payment can be harsh. Family members in Eritrea can be harassed, with seizure of property and black-listing of bank accounts all considered as possible retribution. There have even been reports of people not being able to leave Eritrea unless they paid their diaspora tax.
This is an important issue due to the size of the Eritrean diaspora and migration. A report from the World Bank on migration and remittances stated in 2010 that emigration out of Eritrea was 941,000 people, roughly 18% of the total population. The impact from this migration is massive for the Eritrean economy, with estimates of remittances being 32% of GDP in 2005. This figure lines up with a Chatham House report from 2007 that estimated that remittances were an estimated $350-400 million, which would mean $7-8 million would have had to been gained by the Eritrean government without even considering what would have had to been paid before the remittances were sent. With the mining sector becoming more important, Eritrea may become less dependent on remittances for their economic development. Even so, a report by Berhane Tewolde has shown that over one-fifth of Eritreans live in a house with at least one migrant, of which ¾ receive remittances from abroad, highlighting just how important remittances are for normal Eritreans.
The condemnation from the international community has been swift, both for the practical implications of the diaspora and also the use of the funds by the Eritrean government. Eritrea’s government is widely considered as a highly corrupt country, ranking 160 out of 177 countries in the last Corruptions Perceptions Index by Transparency International. It also has been ranked last in Report Without Borders’ Press Freedom Index, behind North Korea. This terrible ranking stems from the fact that 30 journalists are imprisoned, the most in Africa, and the governments control of media while jamming incoming independent broadcasts. They are are also allegedly funneling money to Al-Shabaab in Somalia, causing regional destabilization for the sake of indirectly attacking Ethiopia, Eritrea’s long-standing enemy. The United Nations Security Council has already acted upon the diaspora tax, banning them through Resolution 2023 in 2011. Even so, Eritrean consulates around the world have continued trying to collect the tax, with Canada expelling Semere Ghebremariam O Micael, Eritrea’s consul in Toronto, for continuing to collect the diaspora tax. Micael’s response was that he was only providing “information” on how to provide donations.
It’s hard to tell whether this policy of taxing the diaspora will continue with increasing pressure from the international community. Even the stability in Eritrea can be questioned, with an attempted coup failing in January 2013. One thing that is for certain is that only normal Eritreans are the ones with the most to lose from this policy.