Afghanistan Slaps U.S. With $1 Billion Tax Bill
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The Fiscal Times
July 2, 2013

The United States has poured billions into efforts to rebuild war-torn Afghanistan – but the Afghan government has violated an understanding between the two countries. It’s presented  the U.S. a billion-dollar tax bill and charged U.S. contractors hundreds of millions in questionable fees.

In a letter dated June 28 to members of Congress, John Sopko, the Special Inspector General for Afghanistan Reconstruction (SIGAR), described the $1 billion in taxes imposed on the U.S. since 2008 as “the cost of doing business in Afghanistan.”

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Those  taxes were paid   out of the $93 billion of U.S. aid   targeted during that period for strengthening Afghan security forces, improving crumbling schools and fostering economic growth in the region.  Sopko termed those taxes “improper” and said they had undermined  efforts “to achieve the U.S. goals” in that country.

The Afghan government has also slapped U.S. contractors with at least $150 million in fines, fees and penalties   imposed in violation of international agreements, Sopko said.

SIGAR’s report found that companies supporting U.S. operations are being charged up to $1,000 a year to obtain business licenses.  In 2012 alone, the Afghan government received about $1.1 million from 1,138 companies for business licenses.

The Afghan government charged U.S. security companies even more – and took in about $4.5 million for business licenses from the 40 security companies operating in the region in 2012.

According to Sopko, the United States and Afghanistan had an understanding that the U.S. government  and private U.S. companies would be exempt from taxes and fees that had been paid  under prior agreements.

But Najeeb Manalai, a spokesman for Afghanistan’s Ministry of Finance, denied that the Afghan government had broken any agreements with the United States. “These taxes that we ask these companies to pay are according to the laws of Afghanistan,” Manalai told Stars and Stripes. “Afghanistan loses a lot through that military cooperation agreement. But still we respect that and we follow all the agreements we have made.”

The extra fees imposed on U.S. contractors “delay the delivery of cargo to support U.S. troops and cost U.S. taxpayers millions in undue burden,” Sopko wrote in his letter to Congress. He added that the U.S. agencies including Defense and State Departments are aware of the problems, but wanted to bring it to the attention of Congress as they consider future appropriations for Afghanistan.

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The SIGAR letter is the latest in a series of revelations about U.S. government waste and abuse of taxpayer dollars in the Afghanistan rebuilding effort Just last week, SIGAR warned Congress that the Pentagon was moving ahead with plans  to supply Afghan forces with a $772 million aircraft system, including 48 helicopters and airplanes – that the Afghan military lacks  the manpower and training  to operate. “It doesn’t make much sense to give someone a Ferrari if they don’t know how to drive stick shift,” Steve Ellis, vice president of Taxpayers’ for Common Sense, said   in response to the SIGAR letter.

Last April,  SIGAR  revealed that a $53 million U.S. Agency for International Development project intended to supply power to Kandahar had been abandoned after it was determined inoperative and unsustainable. 
In an exclusive interview with The Fiscal Times in April, Sopko said that SIGAR auditors have “found systemic problems almost everywhere” they’ve looked. “I think we have some really hard choices to make, and we’ve got to think anew about how we handle some of the assistance and reconstruction programs,” he said

Washington Correspondent Brianna Ehley, based in D.C., covers Congress, government agencies and spending issues, health care, and tax and economic policy for The Fiscal Times.