(Fixes spelling of stationery)
By Katharine Houreld
KABUL, March 31 One of Afghanistan's most
surprising success stories lies tucked away on a potholed street
notorious for suicide bombings and lined with rusting
The work of the country's top tax collector is more
inspiring than the view from his office in Kabul. Taxes and
customs raised $1.64 billion last financial year, a 14-fold
increase on 10 years ago. That means, now, the government can
pay just over half of its recurrent costs such as salaries.
Thanks to tougher enforcement procedures, Afghanistan's tax
to GDP ratio today stands above 11 percent - ahead of
neighbouring Pakistan's dismal 9 percent.
Increasing revenues is vital as donors begin reducing aid
ahead of the 2014 drawdown of NATO troops, who have provided the
backbone for security since U.S. forces invaded after the Sept.
11 attacks on the United States.
By the end of this year the United States alone will have
spent $100 billion on Afghan reconstruction. But future pledges
are a fraction of that.
"We are largely dependent on international aid. We would
like to be independent," said Abdurrahman Mujahid, the new head
of the revenue department. "I would like a sustainable
Afghanistan for all the children."
Despite rising revenues, the government will rely heavily on
donors for years to come. Taxes, customs and mining revenue will
only meet $2.5 billion out of a $7 billion budget this year.
Most of the revenue comes from large corporate taxpayers,
who complain their payments have not improved power cuts,
potholed roads or security.
Corporations pay a flat tax of 20 percent - the same rate
for an individual earning over $2,000 a month.
But unlike developed countries where personal income tax
generates a sizeable chunk of revenue, most Afghans scoff at the
idea of giving the government some of their meagre earnings.
The average annual income, in a country ranked one of the
world's poorest, is just $470, according to the World Bank.
Those making less than $100 a month don't have to pay tax.
"It's not a good government," said moneychanger Abdurrahman
Arif, 28, as he held a wad of soiled notes and scanned for
customers. "I don't pay tax. The rich people don't and the
government should go to them before they come to me."
Afghanistan has a similar problem to neighbouring Pakistan -
the very wealthy don't pay their share, and weak institutions
often have little way of forcing them.
Authorities admit that taxing the rich isn't easy in a
country where the powerful often command militias. But Mujahid
promises tax evaders will "be introduced to the law enforcement
Much of Afghanistan's money is in an undocumented black
economy. Corruption is endemic and the country produces 90
percent of the world's opium. Billions of dollars in cash leave
the country every year in suitcases.
The security situation is discouraging. Taliban and other
militias have made gains in many areas as foreign combat forces
wind down their missions.
But some Afghans still manage to make money. Many businesses
are fuelled by the aid dollars that have poured into the country
over the last decade. Luxury supermarkets, travel agencies and
stationery shops crowd the capital's streets.
A U.S. embassy official in Kabul commended Afghanistan's
ability to raise tax revenues.
"It's a pretty substantial achievement," the official said,
but noted the nation still faced a large funding gap, partly
because of its huge security bill.
"It's going to continue being a problem until they can get
revenues from the extractive industry, and that's going to take
some time," the official said, referring to Afghanistan's rich
but undeveloped mineral deposits.
Donors currently pay for just under half Afghanistan's
operating costs - mostly government salaries - and more than
three-quarters of all development projects like roads, dams and
Rampant corruption means this money is often stolen,
angering donors, fuelling anti-government rage and keeping aid
from some of the world's neediest families.
Donors hope that if Afghans foot more of the bill for public
services they may become less tolerant of graft from their
Mujahid, the new head of the revenue department, has large
shoes to fill. His predecessor Ahmad Shah Zamanzai oversaw much
of the department's growth and didn't shrink from confrontation.
When a vice-president refused to pay tax on income from
renting out houses he owned, Zamanzai threatened to leak it to
the press. Elections were approaching. The vice president paid
Under Zamanzai, the tax department jailed more than 20 tax
evaders, froze bank accounts, slapped on travel bans and
shuttered the premises of businesses that refused to pay.
In one showdown, he took on the glitzy wedding halls that
have mushroomed up in the capital. When the 60 or so venues
refused to pay their dues, he had police padlock a dozen of the
biggest until the rest fell into line.
Zamanzai was appointed head of the state-run Pashtany Bank
as part of a bureaucratic reshuffle this month. His first task,
he said, would be to use skills honed in the tax department to
extract overdue loan repayments from powerful Afghans.
But the tough tax enforcement has angered some businessmen.
Najib Ullah Latify's spotless factory, full of humming
machinery and rows of workers in blue overalls and yellow hard
hats, stands a few minutes drive from the tax office. High
Standard Pipe employs 850 people and supplies pipes for projects
providing clean water all over Afghanistan.
Latify said he'd expand but harassment from the tax man was
hurting his business.
In recent years, he says, he's been repeatedly overcharged
by the tax office and promised refunds have not been credited.
Officials frequently offer to slash his tax bill in return for
bribes, he added. When he refuses, he says, officials disrupt
his imports and suspend his license.
"I don't know what to do, I have shouted everywhere that
they are ruining my business," he said.
"I don't mind paying taxes. Even if 60 percent of it is
spent on drinking and shopping and trips for (politicians')
wives, maybe 40 percent will go to schools or hospitals. But
they must tax me correctly."
The new tax chief, Mujahid, was not familiar with Vitaly's
case, but promised to investigate. More than 10 tax collectors -
whose basic salaries start at $180 a month - have been fired for
corruption in the last two years.
"Corruption is a part of public life in Afghanistan," said
Mujahid. "We have the aim to make this department
This year he's planning to finish computerizing tax records,
usher through a law on Value Added Tax, and strengthen
collection in the provinces - more than 90 percent of government
taxes currently come from the capital.
"There's a lot of achievements, but for sure we have
problems, and the biggest problem is corruption," he said.
(Editing by Jeremy Laurence)