30 Jan Taxation, the prerequisite of state-building, an overview of tax system in Afghanistan
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|Theme||Governance and Political Economy|
|Date of Publication||January 30, 2020|
Historically, Afghanistan has been unable to build a strong state based upon internally mobilised resources or a robust taxation system. Since 1929, following the collapse of the last dynasty, which relied on direct taxation of agriculture, the Afghan states never managed to exceed a domestic revenue share of 13.4% of GDP. Successive Afghan governments experienced chronic fiscal deficits and addressed this problem by mobilising external resources, first from the British and subsequently from the US and Soviet Union in the Cold War context. Afghanistan became a rentier or “allocation” state, deriving over 40% of its revenue since 1958 from foreign aid. This research briefly explores how taxation was negotiated/decided in post Bonn era and what factors have influenced these negotiations. It is a comparative analysis comparing Karzai and Ghani’s administrations.