SIGAR

ECONOMIC AND SOCIAL DEVELOPMENT
with big increases in student and other social benefits, employee benefits,
subsidies, and cultural-heritage-preservation costs. 594
While domestic revenues increased by 32.0% year-on-year, recurrent
revenue streams like taxation and customs revenues increased by a more
modest, yet still respectable, 9.7%. According to an Afghanistan Analysts
Network (AAN) report, this is partially due to stronger revenue-collection
efforts and the impact of new taxes at higher rates implemented in the latter
part of 2015. As shown in Table 3.19, sales-tax revenues increased about
39.5%, while income-tax revenue increased more than 10%. Revenue from
administrative fees increased nearly 75%. Administrative fees are levied
on passports and visas, vehicle registrations, professional and commercial
licenses, and airspace-overflight charges, among other items. 595 Customs
duties and fees made up 18% of the government’s total domestic revenues
in the first 11 months of 2016. However, customs revenue dropped 4.8%
compared to the same period last year. 596 It is unclear whether this is due to
lower imports or reduced collections. 597
Revenues from natural resources almost doubled to AFN 1.2 billion
($18.3 million) from the same period last year—largely due to royalty fees
and the sale of minerals—an unexpected gain given the ongoing constraints
in that sector. The Afghan government also received an AFN 10.3 billion
($153.8 million) revenue boost from what appears to be a one-time receipt
from an unspecified sale of government property. Additionally, revenue
from the sale of land and buildings was substantially higher than the
prior period. 598
Are Revenue Increases Sustainable?
Afghanistan’s fiscal sustainability is at risk, according to the World Bank. 599
Monetary depreciation of the afghani against the U.S. dollar may affect the
government’s purchasing power and reduce the impact of the improved
revenue collection to the extent the government makes dollar-denominated
purchases or disbursements.
The AAN report said depreciation caused the afghani value of customs
duties on imports and other taxes levied on foreign-exchange flows to
increase artificially. As a result, billions of AFN-denominated revenue in
FY 1395 (2016) consisted of a central bank transfer of paper profits from
exchange-rate changes to the budget. It was not a result of any substantial
improvement in the economy, greater revenue collection, or recurrent revenue
streams like new or higher tax rates. The report also said one-time
revenue injections from public enterprises such as the sale of stateowned
land and buildings, passport fees, and Kabul Bank recoveries are
likely unsustainable. 600
The Afghan fiscal gap—the difference between domestic revenues
and expenditures—is large. 601 Domestic revenues paid for only 46.4% of
Afghanistan’s total budget expenditures through month 11 in FY 1395,
152
SPECIAL INSPECTOR GENERAL I AFGHANISTAN RECONSTRUCTION