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Government strategy

Programme 2: Enhancing Revenue Collection

Government’s Five-year Strategic Benchmark
Afghanistan’s total domestic budgetary revenue – equivalent to 4.5% of estimated legal GDP in 1383 (2004/05) – will steadily increase and reach 8% of GDP by 1389 (2010/11). The ratio of revenue to estimated total recurrent expenditures, including estimated recurrent expenditures in the core and external development budgets, is projected to rise from 28% in 1383 (2004/05) to an estimated 58% in 1389, resulting in a continuing need for (1) external assistance to the Core Budget and (2) increasing cost-effectiveness of assistance that funds recurrent expenditure though the external development budget.

Increased domestic revenue generation, based upon a growing and competitive formal economy that can be fairly taxed, is key to the sustainability of development efforts and state-building. Currently, domestic revenue collection amounts to about 4.5% as a percentage of official GDP and is one of the lowest in the world, only covering some 50% of the current operating budget.100 Government’s goal is to significantly increase effective, equitable and progressive domestic revenue collection and to put in place a transparent, results-based, multi-year budget process as a key instrument of economic policy.101 As far as measurable benchmarks are concerned, domestic revenues will increase yearly in line with the MTFF. The MoF oversees the government’s efforts to strengthen domestic revenue collection and enforcement in cooperation with other relevant government agencies. Critical to the success of our revenue generation efforts will be the enforcement of the significantly revised Tax

Code, the new budget law and the new Customs Law, all of which were passed into law in 1384 (2005). To enhance revenues, Government will focus upon (1) the largest potential taxpayers in order to achieve the greatest rewards over the next five years: (2) Reducing complexity and streamline procedures to reduce compliance costs for tax and customs. New regulations and procedures for customs and tax administration will support the implementation of the enacted customs and tax legislations and ensure that the Government has adequate authority to control and manage public finances; (3) Maintaining strong levels of non-tax revenue through licensing of government natural resources, from bandwidth to airspace, from minerals to gas; (4) continuing the reform of the mustoufiat offices (Provincial offices of the MoF), including their reorganization along functional lines reporting to the Treasury and General Presidency of Revenue, in order to strengthen their capacities; (5) Strengthening customs collection and enforcement mechanisms through enforcement the new customs code, further simplifying the tariff regime, modernizing the customs administration and improving controls at the border.

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