Afghanistan Overtaxes U.S. Contractors, IG Finds

May 14, 2013

Afghanistan has slapped U.S.-funded contractors working on reconstruction efforts with nearly $1 billion in taxes since 2008, often in spite of clear tax exemption agreements, a government watchdog has found.

Complicating matters, U.S. contracting officers often don’t understand Afghanistan’s tax laws, resulting in improper payouts to contractors for taxes, the Special Inspector General for Afghanistan Reconstruction revealed in report Tuesday.

“It’s disturbing that the Afghan government is targeting American contractors with unjust taxes and intimidation,” IG John Sopko said in a statement. “It’s even more disturbing that U.S. agencies are letting it happen — all at the expense of American taxpayers, who have already shouldered a heavy burden on Afghan reconstruction. This needs to end.”

Overall, the report found the Afghan Ministry of Finance levied about $921 million in taxes and penalties on 43 contractors. About $93 million came from a corporate income tax category that U.S. and Afghan officials agreed ought to be exempt.

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