Afghanistan's push to tax U.S. contractors could renew tensions

From Karen DeYoung and Joshua Partlow of The Washington Post on Jan. 17:

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.

The Afghan government says no clarification is needed. It has started to send out what it says are overdue tax bills and has threatened some U.S. companies with arrests, loss of licenses and confiscation of aid goods.

"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 in response to questions. "Whatever is not exempted by law and treaties will not be exempted." Afghanistan, he said, is "serious against tax evasion."

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