Afghanistan’s jus­ti­fi­able tax plan

The Washington Post Sunday - - OPINION -

The Jan. 17 front-page ar­ti­cle “Afghan tax ef­fort tar­gets U.S. firms” raised a num­ber of is­sues cru­cial to aid-de­pen­dent de­vel­op­ing coun­tries.

A grow­ing num­ber of aid re­cip­i­ents such as Afghanistan and coun­tries through­out sub-Sa­ha­ran Africa as­pire to re­duce their de­pen­dence on aid. The most im­por­tant route to greater self-re­liance for such de­vel­op­ing coun­tries is en­hanc­ing their tax mo­bi­liza­tion ca­pac­ity. But be­cause a large pro­por­tion of their cit­i­zens are too poor to pay sig­nif­i­cant taxes, in the near term their gov­ern­ments must levy taxes prin­ci­pally on busi­nesses and wealth­ier cit­i­zens. Tax ex­emp­tions for for­eign busi­nesses op­er­at­ing in de­vel­op­ing coun­tries (whether aid-fi­nanced or not) sim­ply erode the tax base and en­cour­age oth­ers to seek ex­emp­tions or more gen­er­ally evade taxes. There is also ev­i­dence that tax ex­emp­tions pro­vided to aid or­ga­ni­za­tions and their sub­con­trac­tors feed cor­rup­tion.

If the United States and other donor coun­tries want re­cip­i­ents in­creas­ingly to help them­selves, they can do so by work­ing with their gov­ern­ments to cre­ate a frame­work of tax com­pli­ance. An im­por­tant step would be for donor coun­tries to agree to cur­tail tax ex­emp­tions by their ex­pa­tri­ates and busi­nesses work­ing in re­cip­i­ent coun­tries.

Roy Culpeper, Washington The writer is a pub­lic pol­icy scholar at the Woodrow Wil­son In­ter­na­tional Cen­ter.

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