Legal issues in Afghanistan’s tax collection system have created burdensome obstacles to effective income tax collection from small and medium sized businesses, Ministry of Finance (MoF) officials said on Monday.
According to the MoF, three large companies owe roughly 15 billion Afs in back-taxes to the Afghan government.
Gul Maqsood Sabit, the head of the MoF’s treasury department, has said that a number of heavyweight taxpayers are involved in legal disputes with the ministry. A special commission comprising representatives from the finance ministry, the Ministry of Justice (MoJ) and the Attorney General’s Office has been formed to address the disputes.
Although 500 large businesses are registered with the Afghan government and are supposed to pay taxes to the MoF, 10 percent of those companies are said to be evading taxes to varying extents.
“We have a number of issues with various companies, including companies in business with the foreign forces,” Sabit said on Monday. “Therefore, we are determined to settle the issues through the special commission,” he added.
While the finance ministry is pursuing legal action against some of the firms who are refusing to pay taxes due, with others, which may simply lack the capacity to pay right away, the ministry is facilitating installment-based payment plans, according to Sabit.
Independent economic analysts have confirmed and expanded upon the MoF’s assessment of the obstacles facing efficient revenue collection. They say legal issues, as well as inadequate monitoring of companies’ activities and the lack of a system for fining those that fail to pay their taxes are primary areas of concern. Of course, commentators have also said that corruption is another big factor hampering proper revenue collection.
“Corruption exists. The goals that need to be accomplished before the emergence of problems in tax payments are ignored because of corruption, so the government needs to focus on the issue and take necessary steps so that taxes are collected professionally,” economic analyst Hasibullah Mawhid told TOLOnews.
Independent estimates puts the number of Afs that would go into the government’s budget if it taxes were more effectively collected in the billions. Many commentators blame mismanagement on the part of the finance ministry for the waste.
The MoF’s treasury department has said government revenues could rise by 30 percent if taxes were properly collected.