Afghanistan Wants to Tax U.S. Contractors

A layer of asphalt is compacted along the Kabul-Kandahar road, one of the many projects funded and contracted by the U.S. Agency for International Development. The Afghan government is looking to tax U.S. contractors operating in the country. Photo: USAID

In a move that could spark tension with the U.S. government, Afghanistan is looking to tax U.S. contractors operating in the Islamic nation, threatening some U.S. firms with arrest, loss of licenses and the confiscation of aid goods for noncompliance.

“I don’t need any new plan [to require a] foreign company to pay tax,” Afghan Finance Minister Omar Zakhilwal said in a text message to The Washington Post. “Whatever is not exempted by law and treaties will not be exempted.”

Taxation of U.S. government assistance is prohibited by U.S. law, and several bilateral accords between the U.S. and Afghanistan. The two governments, however, disagree on what “tax-exempt” means.

Non-Afghan contractors working under U.S.-backed programs, which have recently received tax bills, have already appealed to the U.S. Defense and State departments, but were told to ignore the bills and “stand up for our rights,” according to one official of a U.S. firm working under multiple U.S defense contracts in Afghanistan.

The Afghan government last year also planned to impose a ban on private security firms, whose services are also tapped by development contractors. It has since pushed back the Dec. 17 deadline of disbanding private security firms.

>> Afghanistan Defers Private Security Service Ban

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    Ma. Rizza Leonzon

    As a former staff writer, Rizza focused mainly on business coverage, including key donors such as the Asian Development Bank and AusAID.