THE ERITREAN 2% DIASPORA TAX: HOW THE LEVY CAME TO REFLECT, AND ENABLE, POOR GOVERNANCE

Abstract

The course of the Eritrean 2% Diaspora Tax's development and implementation illustrates how the revenue apparatus reflects, and enables, the inadequate governance existing in present-day Eritrea. This thesis will reveal how the 2% Tax came to underwrite a parochial policy of absolute sovereignty through self-generated revenues.

To do so, the method of analysis will first focus on a brief history of this diminutive Horn of Africa nation and how it endured a legacy of external influence and control from states both distant and neighboring. The Eritrean polity, richly diverse in languages and ethnic groups, was traditionally focused in the agricultural sectors of farming and agro-pastoralism. This population would later be subjugated to Italian colonialism, British occupation, and Ethiopian annexation. In particular, the colonial and annexation periods would acclimate the Eritrean population to taxation practices.

Having illustrated Eritrea's familiarity with taxation and its history of enduring foreign meddling, the thesis will then focus on the immediate environment that shaped its dependence on the 2% Tax. During the Ethiopian annexation, the Eritrean People's Liberation Front (EPLF) would come to lead the revolution toward eventual independence. Eritrea's entry onto the world stage as a sovereign nation was initially seen as a promising development for democracy. Unfortunately, the successful revolutionaries of the EPLF, rebranded as the People's Front for Democracy and Justice (PFDJ), failed to make an equally efficacious transition to democratic political leadership. Instead, the independent Eritrean regime of former fighters reverted to a martial governance paradigm. It began to exert an extraordinary level of control over its domestic population and its diaspora in order to pursue an absolute sovereignty policy. The PFDJ, desiring to remain free of foreign influence and dealing with a traditionally agrarian economy susceptible to drought, made the ill-advised decision to pursue a food-security policy dependent on the agricultural sector. Unfortunately, even in productive years, this policy failed to produce enough money for Eritreans to subsist.

The thesis will then illustrate that, while the food security program was failing, the martially-leaning government had separately mandated that its large diaspora population must pay a 2% Tax on all incomes earned overseas since independence. Following the revolution, there had been a steady waning of voluntary diaspora remittance funds sent back to Eritrea. The sovereignty-focused Eritrean regime, lacking the ability to use food security to fund self-sufficiency, began to depend heavily on the 2% Tax revenues. The insular Eritrean government, free of typical budgetary restrictions regulated via checks and balances, used a variety of coercive methods to exact the 2% Tax from a broadly defined diaspora. In doing so, the strong-armed enforcement of the 2% Tax reflected broader PFDJ governance issues raised by former revolutionaries who had become detractors of the PFDJ.

Lastly, the thesis will focus on the effect of the 2% Tax on the Eritrean diaspora members responsible for paying the levy and on broader issues of regional stability. Reflecting a multilateral conclusion regarding the deficient nature of Eritrean governance, the United Nations identified the unjust manner in which the 2% Tax was collected by the regime and outlawed it.

A 1998-2000 Border War with Ethiopia heightened Eritrean sovereignty concerns and saw the regime focus its efforts towards funding militants countering the Ethiopian government. Unable to ameliorate economic and democratic governance issues within its own country, the regime used proceeds from the tax revenues to support militants in the region countering Eritrea's traditional rivals. The United Nations also achieved international consensus in condemning Eritrea's use of the diaspora levy to subsidize those armed entities.

The background, history and analysis of this levy reveals how the 2% Tax both reflects poor governance and, ironically, serves to enable it. Indicative of this unsuitable leadership, the revenue measure, while forcibly wresting diaspora wealth to support autonomy and self-reliance, contributes to fomenting regional unrest in an ill-conceived effort to manage long-held Eritrean sovereignty fears.