Afghanistan’s cash-strapped government has levied nearly $1 billion in suspect taxes and fees on U.S.-funded reconstruction projects and military contractors over the past five years, often in violation of bilateral agreements with Washington, a new audit by a U.S. government watchdog found.
“U.S. agencies need to have assurance from the Afghan government that” U.S. tax dollars “used to build schools, roads, health clinics, water treatment facilities and funds spent to secure the country are not improperly taxed,” reads a report released Tuesday by the Special Inspector General for Afghan Reconstruction John Sopko.
The report examines a sample of 43 companies operating under contracts with the Pentagon, State Department or U.S. Agency for International Development to build or repair Afghan infrastructure. Mr. Sopko says the companies have between them been assessed $921 million of taxes and penalties for unpaid levies.
Under agreements between the U.S. and Afghan governments, at least some of the contractors and some categories of income or business receipts should be exempt from Afghan taxes, according to Mr. Sopko.
The 43 contractors, not named in the report, have paid only about $67 million of the $921 million the Afghan government says they owe.
Employees of some contractors have been arrested over unpaid taxes, and some work supporting U.S. operations may have been interrupted, Mr. Sopko wrote.
Taxation demands on U.S. contractors will be negotiated in talks with the Afghan government about the U.S. presence after the NATO-led combat force pulls out in December 2014, State Department officials told Mr. Sopko.
The report states it was not possible to assess the accuracy or rectitude of the Afghan tax demands because officials declined to provide Mr. Sopko’s team with documentation.
• Shaun Waterman can be reached at swaterman@washingtontimes.com.
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