Revenue Department

Introduction

In a post-conflict environment, it is a top priority for the central government to commence mobilizing revenue so it can quickly provide essential services from its own resources.Revenues in Afghanistan are from two principal sources customs from the international movement of goods, and domestic taxation. This plan is concerned with the second of these sources. It provides an outline of the key activities over the next 12 months to mobilize domestic taxation in Afghanistan.The provincial Mustofiats and district offices have very low levels of physical infrastructure, with little office equipment or damaged buildings, while some have no electricity.

Current situation analysis

Domestic taxation represents round 68% of the current revenue stream to the central government.Domestic taxation for the central government is collected in provincia Mustufiats and district offices. The General Presidency of Revenue in Kabul provides the national headquarters function and the coordination of provincial operations.The flow of domestic taxation to the central government is subject to uncertain provincial influences that affect the level and timing of receipts. Domestic taxation received for SY 1387 by the central government has totalled Afs 18,860m.

Human capacity has been severely weakened by the years of conflict. Skill levels are low. Systemic corruption of tax officials is a serious threat to future tax collection. Average wage levels are around US $35 per month.Methods, systems, and work practices to administer taxes are inefficient and do not reflect modern tax administration practices. There is no systematic assessment of taxpayer risk. Mustofiats and General Presidency of Revenue have not adopted the administration of taxpayers by segments that reflect the size of the taxpayer and their potential contribution to the national revenue. There is no focus on the largest taxpayers.Compliance with the tax laws is low and there is little voluntary compliance. Enforcement of tax laws is dependent upon provincial and state police with little controls and uncertain accountability for actions. The level of coordination and cooperation between the General Presidency of Revenue and other ministries is low.Technical assistance for taxation administration needs to be urgently increased.

Opportunities for development and reform

The taxation administration has opportunities for future development and reform based upon:

1. The national priority for revenue mobilization within the Afghanistan development budget.
2. The availability of technical assistance to support a reform program.
3. The implementation of Priority Reform and Restructuring (PRR) Status within the General Presidency of Revenue in the Ministry of Finance.

Threats to development and reform

The following could have an adverse impact on the ability of the Taxation Administration to implement a reform program:

1. With salary levels remaining low compared to international organizations, the Ministry of Finance faces challenge of hiring qualified staff.
2. As a transitional administration, the interim government may be unwilling to attempt substantial tax reform.
3. Progress with revenue mobilization from the provinces and tax policy reform may not be sufficient to instill donor support for taxation administration reform.
4. Reform programs which remove opportunities for corrupt practices could be resisted by staff, which delay or block reform.

Assumptions underlying taxation reform

1. National security is adequate.
2. A national fiscal framework is adequately supported at all levels of government.
3. TISA approval to tax reform is forthcoming.
4. Timely, skilled, and sufficient technical assistant is available to tax administration.
5. There is a complete cooperation across ministries in support of tax reform.
6. Budget support to the tax administration is sufficient.

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