Enab Baladi – Jana al-Issa

The Autonomous Administration of North and East Syria (AANES) extended on August 13 the legal deadline for obtaining a license to open money exchange and transfer shops in its areas of influence.

Days later, the Kurdish-run governing body issued a new law aimed at regulating the trade and manufacture of precious metals, including procedures for licensing and practicing professions related to this trade in the area it controls.

Thousands of dollars in fees

After obliging exchange companies and offices to license, AANES announced the licensing fees and some of its conditions without specifying what it based these numbers on.

AANES stipulated that the minimum capital for exchange companies operating in the region be $500,000 and $50,000 for the capital of exchange offices, with a financial guarantee of $75,000 for exchange companies and $7,500 for offices.

The Autonomous Administration indicated that these fees will increase if there are other branches in the region, whether for companies or offices.

The decision included setting the licensing fees for the main center of the exchange company at $3,000 and for each of its branches at $300, while the annual license renewal fees amounted to $1,000 for the main branch and $300 for each branch.

AANES set licensing fees for exchange offices at $500 for the main office and $100 for each affiliated branch, while the annual renewal fees reach 300 dollars for the main office, in addition to $100 for each affiliated branch.

In a related context, the licensing fees that will be imposed on dealers in precious metals, which means platinum, gold, silver, and palladium, have not been issued at the time of writing this report, provided that the AANES’ Central Monetary and Payments Office will issue instructions later specifying the conditions and requirements for the license, noting that license renewal will take place annually.

To earn more

The owner of an exchange company based in Qamishli, northeastern Syria, who asked not to be named for security reasons, told Enab Baladi that the Autonomous Administration’s recent move to impose fees on money exchange and gold professions falls under the heading of collecting the largest amount of profits and taxes from the exchange sector, which is the most profitable sector in the markets of the Syrian Jazira region.

He considered that the latest fees are “reduced” because the fees that were offered for the first time are close to $1 million for licensing the company’s main branch.

The second reason is to organize the work of remittance companies and link them to the Monetary office to monitor the volume of funds entering and leaving them, and thus imposing taxes commensurate with the volume of their work, in addition to monitoring major transfers, according to the owner of the company.

Ibrahim, the owner of an exchange company in Qamishli (who asked not to reveal his full name for security reasons), told Enab Baladi that AANES wants to benefit from the volume of funds circulating in these sectors, as millions of dollars are traded daily, a large part of which comes in the form of external transfers.

He considered that the economic atmosphere in the region is volatile, and decisions are subject to the will and mood of influential people who want to monopolize the exchange profession for the benefit of large companies at the expense of small shops whose owners make a living from these professions.

Ibrahim questioned AANES’ ability to control the transfer and money exchange market because this profession is widely spread in the region through the owners of food stores (small shops) and others.

US pressures AANES

Sinan Hatahet, senior fellow at the Omran Center for Strategic Studies, said that the recent decisions are not the first attempt by AANES to control the remittance market and the sale of gold, considering that the goal of all these attempts is to control the exchange rate, which gives it the ability to better control prices of products linked to trade and monopoly networks of merchants dealing with AANES.

On the other hand, these decisions enable AANES to benefit from transfer commissions and licensing fees, while residents of Syria in all regions rely heavily on financial transfers, according to Hatahet.

Hatahet, a co-researcher in the Wartime and Post-Conflict Syria project at the European University Institute, pointed out that some of the region’s people use the remittance system in the absence of banking systems for many financial transactions, such as financing the purchase of land, which indicates the presence of a large amount of cash transferred on a daily basis, and thus controlling its sources brings great economic benefit to AANES, in addition to the security aspect of the issue by knowing the beneficiary of the transfers, and the consequences this has on taxes.

For about a year, the region has been witnessing attempts, supported by the United States, towards establishing a type of centralization of financial management in the region as a type of condition for economic financing of the AANES, according to the researcher.

Dr. Karam Shaar, director of the Syrian program at the Observatory of Political and Economic Networks, also agrees that the recently issued decisions are a continuation of a set of other previous laws that fall within the same context.

Shaar, who holds a Ph.D. in Economics, told Enab Baladi that AANES is trying, under pressure from the United States, to move towards institutional work rather than being a “militia” that controls the region, and thus moving towards organizing and registering company records and a clear tax system.

The expert considered that the primary purpose behind this trend is regulatory, and it may have good effects, but private institutions, which will be forced to pay these fees and taxes, must also look for gains and benefit more from that, such as through having access to a joint economic record or this environment creates a better atmosphere for the presence of a professional, commercial or economic chamber that helps them in their work mechanism.

Tariffs and Taxes are an essential resource

It is difficult to track how the Autonomous Administration’s budget revenues are collected and spent, but its basic resources come from oil sales, taxes and fees on income, and fees on imported materials and goods, according to a study conducted by economic researcher Sinan Hatahet, published within the Middle East Paths program in January 2020.

The study explained that the Finance Authority is the central institution in AANES responsible for managing the region’s finances, noting that local councils also have the right to collect and impose taxes and collect revenues imposed on most professions and crafts, including small institutions such as street vendors and shops and public transportation.

The Autonomous Administration justifies these measures as aiming to finance public services, but there is a general belief that the quality of service provision is not proportional to the amount of taxes collected.

The taxes collected by AANES and local councils fall into two main categories, the first of which is fees on registering companies, practicing a profession, building permits, or services provided by administrations at the local level and the canton level (the administrative division of the region), and the second is income tax on salaries. 

The study indicated that reports from within the Autonomous Administration conflict about the amount of fees imposed by its affiliated institutions, which raises doubts about their arbitrary nature or the inability to apply the same standards to all products or geographical sectors.

Despite the clarity of the tax, monitoring mechanisms are almost non-existent in the absence of a unified banking or financial system that enables financial authorities to track residents’ financial transactions.