Afghanistan’s justifiable tax plan
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.