Tax collectors play key part in helping Afghanistan

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 (£1.1bn) last financial year, a 14-fold increase on ten years ago.

That means, now, the government can pay just over half of its recurrent costs, such as salaries. Due to tougher enforcement procedures, Afghanistan’s tax to GDP ratio now stands above 11 per cent – ahead of neighbouring Pakistan’s 9 per cent.

Increasing revenues is vital as donors begin reducing aid ahead of the 2014 withdrawal of Nato troops, who have provided the backbone for security since US forces invaded after 9/11.

By the end of this year the US alone will have spent $100bn 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 $2.5bn out of a $7bn budget this year.

Most of the revenue comes from big firms, who complain their payments have not improved power cuts, pot-holed roads or security. Businesses pay a flat tax of 20 per cent.

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 money changer Abdurrahman Arif, 28. “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 taxing the rich isn’t easy in a country where the powerful often command militias. But Mr Mujahid promises tax evaders will “be introduced to the law enforcement agencies”.

However, much of Afghanistan’s money is in an undocumented black economy. Corruption is endemic and the country produces 90 per cent of the world’s opium. Billions of dollars in cash leave the country every year in suitcases.

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. But the tough tax enforcement has angered some businessmen. Najib Ullah Latify’s spotless factory, full of humming machinery, 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.

Mr Latify said he’d expand but harassment from the tax man was hurting his business. In recent years, he said, he’s been repeatedly overcharged by the tax office and promised refunds have not been credited.