“DOD and State and the primes are telling them ‘No, you’re subs, don’t pay taxes??” the company official said. But “the Afghan government has become so hard to work with on so many fronts that I’m not sure whether this issue is still in the embassy’s top ten list of things.”
Another contracting executive said there was “tension in the embassy” between those officials who work on helping the Afghan government collect more revenue so it can pay its own way, and those “responsible for working on behalf of U.S. business.”
“We know we’re going to have to pay at least $8 billion to $10 billion a year for the next 10 years to keep these guys running,” the executive said. “The International Monetary Fund and the World Bank are putting heat on the government to create a tax base. Some of the biggest cash flow into the country is Western aid.”
This is interesting. You have two forces at play here. There is the IMF and World Bank who want Afghanistan to have a tax base, and you have the US that is supposed to protect US business from being taxed.
My view on it is that Afghanistan benefits from this western aid because their main goal is to get that country on it’s feet. Taxing these aid providing companies is wrong, and I certainly hope the US embassy will work to protect American companies from these blood suckers. –Matt
Afghanistan’s push to tax U.S. contractors could renew tensions
By Karen DeYoung and Joshua PartlowSunday, January 16, 2011
The Afghan government is ramping up efforts to tax U.S. contractors operating there – an effort that could raise millions for the cash-strapped government but could also provoke fresh confrontation with the United States, according to U.S. and Afghan officials.
Taxation of U.S. government assistance is barred by U.S. law, as well as by a number of bilateral accords between Afghanistan and the United States. But the wording in the documents is vague, and the two governments disagree on what “tax-exempt” means.
Non-Afghan contractors who have recently received tax bills for work done under U.S. government programs say they have appealed to the Defense and State departments to clarify the matter with the Afghans. But they have been told simply to ignore the bills and “stand up for our rights,” said one official of an American company that has multiple U.S defense contracts in Afghanistan.