Taxation in Afghanistan

This article refers to Taxation in Afghanistan. In the early 1980s, direct taxes accounted for about 15% of government revenues. The share provided by indirect taxes declined from 42% to 30%, as revenues from natural gas and state enterprises played an increasing role in government finance. Tax collection, never an effective source of revenue in rural areas, was essentially disabled by the disruption caused by fighting and mass flight. Under the Taliban, arbitrary taxes, including those on humanitarian goods, were imposed.

In 2005 the government introduced an income (or wage) tax. Employers with two or more employees were required to pay 10% on annual income over about $3,500 and 20% on income over about $27,000.

Corporate taxes
No matter what kind of legal form the company has, all of them are required to pay a corporate tax of 20 percent. That, you can find in the 4th article of the Afghan Income Tax law.

Value-added tax (VAT)
In 2014 the parliament of Afghanistan worked close to International Monetary Fund to raise the domestic revenues and therefor added a value-added tax (VAT) of 5 percent. Although, the existing law doesn’t include all goods and services (hotels are affected for example) but the government is planning to broader this tax. VAT is affecting both domestic business people and their trade partners. The domestic tax payer is obliged to pay the VAT on the taxable supply and the importer is obliged to pay the VAT on the taxable imports.

Business receipt tax (BRT)
Afghanistan has many different tax rates of business receipt tax on their goods and services. The size of the business receipt tax depends on which kind of company and how large the company is. Lowest BRT has travel agents, culture, smaller restaurants and commodities with a tax rate of 4 percent. The lager restaurants, hotels and club halls have to pay 5 percent in business receipt tax. That tax rate was increased during 2015, from 2 percent to 4 percent, when the government wanted to increase the state revenues to finance the increased need for funds for aid and foreign arms.

Income taxes
The income taxes differ depending on how large the salary is. If you have a salary from 0 to 5000 AFN, you are not obliged to pay any tax. However, if you earn above that you will be. From 5001 AFN to 12 500 AFN you pay 2 percent tax. The income tax gets different from 12 501 AFN to 100 000 AFN. You are not only obliged to pay a tax rate of 10 percent; you also must pay a fixed amount of 150 AFN. When you earn more than 100 001 AFN you must pay 20 percent tax and pay a fixed amount of 8 900 AFN.

The development of the fiscal situation in Afghanistan during 21st century
Since the beginning of 21st century the governmental revenues increased. Partly, it has decreased, but the overall view one can see is an increase. One of the reasons for this improvement is a more efficient tax system. Although, the revenues have been less than what they planned for due to for example the tax evasion and the large drug market, and because of this, the budgets have been tight. In 2015, the government made some improvements of both the tax administration and the customs and that made the revenues to increase during 2015.

Customs and fees
Except from the regular taxes on income and corporations, there are a number of other different customs and fees that has increased in Afghanistan after the creation of NUG (National Unity Government), that has resulted in increasing revenues for the state. To begin with there are general increase of customs fees on certain items and air space fees. There is also a tax on fuel import and a 10 percent fee on cellphone top-up card.

The national budget and its allocation of 2018
The national budget for 2018 consists of AFN 327 billion and is a decrease of the size of the budget of 17 percent, from the earlier year (2017: AFN 429 billion). They voted for the budget in the end of November 2017 and the expected tax revenues for Afghanistan was by then AFN 157 billion. There is not a clear reason of why the budget has decreased that much but alleged explanations have been that the earlier budget has been false and it’s also possible that the government have understood how to use the development budget money more efficient.

What the Afghan government spends the most money on is security with 41 percent of the national budget. 13 percent goes to education, 11 percent goes to infrastructure, 9 percent goes to agriculture and rural development, 7 percent goes to governance and 7 percent goes to social security. 5 percent goes to contingency codes; 4 percent goes to health and 2 percent goes to economic governance.

Source from Wikipedia