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Afghanistan Looks To Introduce VAT

by Mary Swire, Tax-News.com, Hong Kong

12 October 2011


An International Monetary Fund (IMF) mission and the Afghan authorities have reached a staff-level agreement on a three-year program under the Extended Credit Facility (ECF) of about USD129m to support the authorities’ economic program. The Afghan authorities plan to continue revenue administration reforms and introduce a value-added tax in 2014.

Pending approval by IMF management and the completion of the program prior actions, the Afghan authorities’ request for an ECF arrangement is expected to be submitted for the IMF Executive Board’s consideration in November.

At the conclusion of the discussions which were held in Kabul, IMF mission head Schimmelpfennig said that the Afghan government will have to balance an expected gradual decline of the current levels of donor support over the next decade with new sources of revenue. He also said that to generate additional resources over the medium-term, Afghan authorities plan to continue revenue administration reforms and to introduce a value-added tax in 2014.

In this year’s February budget the country’s Ministry of Finance predicted AFN92bn (approximately USD2bn) domestic revenue for the year, while the ordinary budget was set to AFN150bn. The development budget was AFN65bn.

Schimmelpfennig said that: “Despite a difficult external environment, a volatile security situation, and this year’s drought, real GDP growth should range between 6% and 8% during the program period, and could increase further once the development of the mining sector begins.”

“Over the medium-term, sustaining high and inclusive growth with a view to reducing poverty will require a stable security situation, improvements in governance, and an enabling environment for the private sector,” he added.

TAGS: tax | economics | value added tax (VAT) | mining | fiscal policy | gross domestic product (GDP) | budget | International Monetary Fund (IMF)

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