The Tax Collection Capacity of Afghanistan: An Answer in the Light of Rampant Tax ‎Evasion Practices

Ms. Lyla Abdul Latif

Volume 1 Issue 1 | Dec 2019

DOI: 10.31841/KJL.2021.8

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Abstract

Afghanistan has taken a number of measures to combat tax evasion, however, they have not led to strengthening tax compliance in the country. This is due to the prevalence of economic crimes and the weaknesses in the state’s tax model. ‎This article argues that these problems present the greatest ‎hurdle in Afghanistan's quest towards a tax compliant society. By considering Kabul and ‎Kandahar as its case study provinces, the article employs several methods to investigate tax ‎evasion practices in the two provinces. In doing so, twelve indicators were developed as ‎constructs to identify instances of tax evasion. ‎The intention of this article is not to provide a comprehensive overview of estimates of ‎every tax evasion component, nor of every tax evasion channel, but to specifically identify ‎the common tax evasion practices in the two provinces. The findings suggest that as a result ‎of the hierarchisation of the Afghan tribal society, the state co-opted tribal leaders and ‎appointed them as local representatives, in charge of gathering taxes and duties from ‎fellow tribesmen. This, the interviews revealed, has resulted in an obstacle for the state as ‎the only sovereign with the monopoly to collect tax. Particularly in instances where the ‎tribal leaders go far beyond their duty to collect tax and not remit it to the state. The ‎resulting fragmented political structure that sits between local tribal leaders and state ‎institutions have made it difficult for the Afghan government to get the local communities to ‎remit taxes. Interviews with government officers, individuals and corporations in Kabul ‎and Kandahar confirm that the rise of the underground economy due to poverty, warlord ‎directives, contest between state and tribal leadership and insecurity has contributed to ‎high incidences of smuggling, trade in narcotics, corruption, and money laundering. ‎Political interference further prevents full disclosure on transactions and weak ‎implementation of reporting standards. ‎