Afghan Tax – GDP Ratio 11%, Pakistan 9%

Afghans warned: the taxman is coming after you

By Katharine Houreld

KABUL (Reuters) – One of Afghanistan’s most surprising success stories lies tucked away on a potholed street notorious for suicide bombings and lined with rusting construction equipment.

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 neighboring 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 September 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. ….

Read more » Reuters

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