Afghan Government Wins First Round Of Tax Battle

by Jason Gorringe, Tax-News.com, London

19 July 2002

Afghanistan's embattled government won a small victory earlier this week, when it was revealed that the country's western Herat province had agreed to transfer a portion of customs revenue to the central budget.

Speaking to the Financial Times, newly appointed Finance Minister, Ashraf Ghani revealed that: 'I am pleased to announce that the flow of resources over the last few days has begun.'

Although the amount transferred is relatively small - 8 billion afghanis - it represents a symbolic victory for Mr Ghani, who has been battling for months to force the provincial authorities to transfer tax receipts to the central government.

The country's centralised authority relies, for much of its domestic budget revenue, on customs duties which are collected at Afghanistan's international borders. However, traditionally this revenue is kept by the provincial governors, leaving the government with little to work with.

Although a pleasing development, however, this move represents a drop in the economic ocean for Hamid Karzai's government.

According to the Financial Times, in addition to its other woes, the country's financial situation is now so dire that neighbouring Uzbekistan was forced to cut off electricity supplies to the north of the country this week, following four months of non-payment.

To make matters worse, President Karzai has stated that the Afghan government will not be borrowing to finance its deficit, leaving the country almost entirely reliant on foreign aid.

Recommended