International

Afghan Taxes Weigh Heavily On U.S. Contractors, Report Says

Since 2008, the Afghan government has assessed nearly $1 billion dollars in taxes — sometimes erroneously — on U.S. contractors working in the country, according to a new report from the Pentagon's Special Inspector General for Afghanistan Reconstruction, NPR's Tom Bowman tells our Newscast Desk.

John Sopko, the special inspector general, says the tax confusion has led to the arrest of contractors for nonpayment, increased costs to the U.S. government and interruptions to American military operations.

According to the report, which we'll embed below and have posted here, Afghanistan's Ministry of Finance has levied some of the taxes despite agreements that should have provided exemptions: "For example, $93 million of the $921 million represented taxes levied on business receipts and annual corporate income — a tax category that both the U.S. and Afghan governments have agreed should be exempt for contractors operating under covered agreements."

At issue, the report adds, is the finance ministry's view that the agreements "provide tax-exempt status only to prime contractors, and not subcontractors, whereas U.S. government officials contend that the agreements provide tax exemption for all non-Afghan companies (both prime and subcontractors) supporting U.S. government efforts."

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