Karzai's Taxmen Net Millions

Monday, 21 February, 2005

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Rahimullah Samandar

President Hamed Karzai’s drive to collect taxes from recalcitrant regions of Afghanistan has borne fruit – surprisingly fast and with no apparent opposition.

Following a speech by Karzai on May 18 demanding that regional leaders fall into line, the finance ministry sent teams out to 11 provinces located around Afghanistan's borders. They recovered millions of dollars in customs incomes in the space of one week.

Provincial authorities gave government officials access to their records – the first time Karzai’s government has had such a detailed overview of these revenues – and pledged to hand over much of their customs earnings.

"We are rich now," said Mohammad Ehsan Assadi, who heads the treasury department in Kabul.

Assadi told IWPR that officials collected 20 million US dollar from Herat province alone. He contrasted this with the total of six million dollars that the province has sent to the Afghan administration since the latter came into being in December 2001. Herat, run by governor Ismail Khan, makes 57 million dollars a year, according to finance minister Ashraf Ghani, or five times that if other estimates are to be believed.

The team in Herat was led by the finance minister himself. On his return, he told a June 3 press conference that funds dollars collected around the country had allowed some seven million dollars' worth of back pay to be released to the military.

Asked whether it was fair that Ismail Khan was getting to keep a proportion of Herat's income, Ghani said that was "true, but we must compromise".

Close to 1.5 million dollars came in from Nangarhar, on the eastern border with Pakistan, Assadi said. Nimroz, which borders both Pakistan and Iran, promised to release about 1.5 million dollars. The other eight provinces visited by finance officials turned over smaller amounts, less than a million dollars each.

After his speech three weeks ago, Karzai called in the governors of 11 border provinces and made them sign an agreement to comply with all his orders in the future. Enforcement of this agreement began with the customs investigation.

Finance minister Ghani has set a central government budget of 550 million dollars for the year starting April 2003. Although he is hoping most of the revenue will come from foreign donors, he has budgeted for income of 200 million dollars from domestic sources such as taxation.

Officials in the provinces were reportedly cooperative with the Kabul delegations. But it is likely they managed to hold onto a good proportion of their income. Finance ministry officials told IWPR that since the financial year began in March, the amounts submitted by all provinces have been up on the previous year – but still represent a small percentage of their real income.

IWPR took a closer look at how the flow of tax revenue works at regional level in Nangarhar, which is one of the big earners as it is the main route for the huge flow of goods coming from Pakistan. The head of the finance ministry delegation, Haji Gul, said the authorities in the regional centre Jalalabad were cooperative.

The team found that in the first four days of its investigation the province earned 4.6 million afghanis, or about 92,000 dollars. At that rate, Nangarhar could net about 8 million dollars this year.

The ministry's director of customs, Shah Mahmood Safi, said that in the last financial year Kabul only received 500,000 dollars from Nangarhar, even though local customs officers deposited a total of 4.14 million in the provincial bank. Such discrepancies were typical around the country, he said.

The income from customs is supposed to be banked locally and transferred to Kabul. But lower-level workers say money is skimmed off at several points along the way by both civil and military authorities.

An accountant who handles customs collection told IWPR a different story, “The warlords make us sign cheques for them [to withdraw government money], and several times they have threatened us because we did not sign their cheques – especially the army corps, the intelligence service, and police headquarters.”

“The Nangarhar authorities remove 80 per cent of the income illegally, in one way or the other,” he said.

The province’s deputy head of customs, Sayed Jamal Pacha, defended his department, “We give all the daily income to the bank, and we have the receipts and documents for that. We do all the work in a legal and accurate manner.”

Officials acknowledged that they had kept some customs income, but they say that is only because Kabul has not been sending them the funds due to them.

Afridi, who is responsible for revenues in the Nangarhar provincial government, said that last year the region earned 445 million afghanis, about 8.9 million dollars, from customs and other local taxes and charges. Most of the money was spent by the military, he said.

“This year (starting March 2003) the central government allotted 400 million afghanis to Nangarhar, but they did not send it, so we used the income that we had in Jalalabad,” he told IWPR.

Haji Amir Khan Lewal, deputy head of security for Nangahar province, agreed that funds had been diverted to pay legitimate local costs “Before now, there were no rules for revenues in force, so – by order of the (provincial) governor – we took budgetary expenditure out of the provincial bank, because we needed it for security and police staff,” he said, adding that the money went to pay for police pay, cars and equipment.

Nangarhar governor Haji Din Mohammad told IWPR that although he is complying with Karzai’s orders, he wants an assurance that Kabul will from now on send back enough money to cover local expenditure.

“Nangarhar is a border province and there are a lot of problems, which need money,” he said.

Rahimullah Samander is an IWPR editor/reporter in Kabul. Abdullah Saar and Abasin Baheer are independent journalists in Jalalabad who recently completed an IWPR basic journalism training course.