The Ministry of Finance (MoF) has called on all local and international NGOs to pay their taxes promptly or face legal consequences, including fines and a revocation of their operating licenses.
Over 2,400 local and international NGOs are present in Afghanistan and MoF says all but a few are liable to pay tax.
“NGO staff salaries [national and international employees], office and residential rent, contracts and other economic and financial activities are subject to tax,” Najib Manalai, an adviser to MoF, told IRIN, adding that NGOs were exempt from corporate income tax due to the non-profit nature of their work.
Taxes on NGOs generate over 1.5 billion Afghanis (about US$33 million) of revenue for the treasury annually, according to MoF.
Manalai said some NGOs had not paid their taxes for a while, but he declined to name them, saying tax issues were confidential.
“We have always advised our member NGOs to pay their taxes on time,” said Mohammad Hashim Mayar, deputy director of ACBAR, a consortium of over 100 local and international NGOs.
He said some NGOs had been fined by MoF for not paying their taxes on time.
A spokesperson for Oxfam said it “complies with the laws of the countries in which it works, including paying all the taxes we are required to pay in the country”, but did not specify how much it pays annually.
“Biased” tax policy?
UN agencies, US-NATO forces and a few other donor agencies such as the US Agency for International Development (USAID) are exempt from taxes as per bilateral agreements with the Afghan government, officials said.
UN international employees are also exempt from income tax but locally employed UN staff are supposed to pay tax on their income, though no UN spokesperson was available to confirm whether the over 3,000 UN local employees were paying income tax.
Current Afghan law stipulates the following tax bands: A monthly income of up to 5,000 Afghanis (US$110) is exempt from tax; incomes of 5,000-12,000 Afghanis are subject to 2 percent tax; 12,000-100,000 attracts 10 percent tax; and people earning more than 100,000 Afghanis a month are subject to 20 percent tax.
“This tax policy is very unfair and biased because it does not touch the big fish but concentrates only on small NGOs and Afghan nationals who don’t even earn 10 percent of the fat salaries the foreigners receive here,” said one NGO worker who preferred anonymity.
“Taking high taxes from some aid workers and exempting others is perceived as unfair,” said ACBAR’s Mayar, adding that the government appeared to treat NGOs like private companies when it came to tax.
Some NGOs which implement USAID-funded projects have refused to pay their taxes, saying they are covered by USAID’s exemption, officials and aid workers said. The USAID office in Kabul was not immediately available for comment.
“There is a misunderstanding among some NGOs and foreign aid agencies that they are exempt from taxes - that is wrong,” said MoF’s Manalai.
This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information: https://shop.un.org/rights-permissions