Afghanistan’s New Income Tax
May 31, 2005
War-torn Afghanistan has announced a new income tax to help wean the central government off foreign aid:
The wage tax is being imposed on all businesses with two or more employees… The new tax will be set at a rate of 10 per cent on income over 12,500 afghanis (US $292) a month. Income over 100,000 afghanis a month will be taxed 20 per cent…
The International Monetary Fund and World Bank are advising Afghanistan how to start a tax regime after a quarter century of conflict and chaos but some business people already say they are facing a tax regime that hinders growth…
[B]usiness people who do pay tax say the tax base is far too narrow and they are already burdened by a list of taxes including a 20 per cent corporate tax and a 12.5 per cent tax on gross receipts.
Currently Afghan tax collections only account for 30 percent of goverment revenue. The rest is foreign aid.
The big challenge: Designing a broad-based income tax in a country where an estimated 1/3 of national income derives from illegal heroin sales.