Negotiations to resolve ongoing tax disputes between U.S. development implementers and the Afghan Ministry of Finance took a turn for the worse over the weekend, leaving some contractors and NGOs now facing “no-fly” restrictions and threats of arrest with a shrinking list of options.
These aid implementers “are seriously considering withdrawing from Afghanistan in the next 60 days” if Washington does not step in and end a worsening pattern of “illegitimate” taxation by the ministry, according to the law firm that would seek to make the legal case for affected organizations to void their contracts if they decide to do so.
The approaching end of the Afghan fiscal year on Dec. 20 and the supposed drawdown of U.S. funding to the country in 2014 have combined to make a tough business environment even worse. The fiscal year previously ended on March 20 in Afghanistan, but the country’s finance ministry recently moved that date up three months for fiscal 2013, and with it the deadline for tax filings.