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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
ECONOMIC AND SOCIAL DEVELOPMENT TABLE 3.19 DOMESTIC REVENUES, AS OF DECEMBER 4, 2016 (AFN) Taxation & Customs Revenues Category 1394 (Through Month 11) 1395 (Through Month 11) % Change Fixed Taxes 8,943,235,446 8,843,374,290 -1.12% Income Taxes 17,964,460,569 19,812,428,104 10.29% Property Taxes 686,367,455 335,257,974 -51.15% Sales Taxes 17,683,886,523 24,667,010,361 39.49% Excise Taxes 0 0 — Other Taxes 3,950,685,838 4,175,776,238 5.70% Tax Penalties and Fines 0 0 — Customs duties 26,655,714,979 25,374,861,269 -4.81% Social Contributions Other Revenue Retirement contributions 3,690,559,940 3,713,929,234 0.63% Income from Capital Property 2,369,104,650 1,534,228,279 -35.24% Sales of Goods and Services 3,870,931,051 5,251,631,827 35.67% Administrative Fees 11,721,186,846 20,291,590,029 73.12% Royalties 141,523,405 215,072,276 51.97% Non-Tax Fines and Penalties 750,118,729 915,449,439 22.04% Extractive Industry 471,600,579 1,001,855,537 112.44% Miscellaneous Revenue 7,814,762,204 13,402,415,719 71.50% Sale of Land and Buildings 22,714,059 1,096,934,939 4729.32% Major One of Revnue/Dorment [sic] — 10,256,709,000 — Note: The exchange rate on the date the MOF pulled financial data for FY 1395, month 11 was AFN 66.68 to one U.S. dollar. The exchange rate on the date the MOF pulled financial data for FY 1394, month 11 was AFN 66.88 to one U.S. dollar. The other-revenue statement line “Major One of Revenue Dorment” was unexplained, but appears to refer to a one-off revenue gain from sale of a government asset. Source: MOF, Aqrab Financial Statements FY1395, 12/4/2016; MOF, Aqrab Financial Statements FY1394, 12/3/2015; Da Afghanistan Bank, Exchange Rates, 12/4/2016 and 12/3/2015. representing a net deficit of AFN 162.5 billion ($2.4 billion). Donor assistance reduces or closes the gap, as depicted in Figure 3.28. Afghanistan’s fiscal gap of 53.6% rose sharply from the 48.1% reported last quarter, but narrowed compared to 60.0% for the same period in FY 1394. With donor contributions included, the budget showed an AFN 15.5 billion ($231.9 million) surplus. 602 Other factors that can widen or shrink the fiscal gap include budget-execution rates, qualification for donor incentive funds, revenue collection, and changing expenditures. 603 In October 2016, the World Bank projected Afghanistan’s revenue potential to increase from 10.2% of GDP in 2015 to 14.5% by 2030 under its baseline assumption. 604 In April 2016, the Bank projected expenditures to rise to 36% of GDP by 2020. 605 Even with a 23% improvement in actual REPORT TO THE UNITED STATES CONGRESS I JANUARY 30, 2017 153
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SIGAR JAN Special Inspector General
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JOWZJAN BALKH KUNDUZ TAKHAR BADAKHS
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This quarter, SIGAR issued 13 audit
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EXECUTIVE SUMMARY • the abandonme
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TABLE OF CONTENTS SECTION 4 203 OTH
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1AFGHAN PROCUREMENT REFORM 1
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AFGHAN PROCUREMENT REFORM THE NEED
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AFGHAN PROCUREMENT REFORM from ente
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AFGHAN PROCUREMENT REFORM Conflict:
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AFGHAN PROCUREMENT REFORM that alth
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AFGHAN PROCUREMENT REFORM system fr
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AFGHAN PROCUREMENT REFORM identify
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AFGHAN PROCUREMENT REFORM THE STAKE
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2 SIGAR OVERSIGHT 17
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SIGAR OVERSIGHT ACTIVITIES SIGAR OV
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SIGAR OVERSIGHT ACTIVITIES on TFBSO
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SIGAR OVERSIGHT ACTIVITIES Performa
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SIGAR OVERSIGHT ACTIVITIES were pro
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SIGAR OVERSIGHT ACTIVITIES Financia
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SIGAR OVERSIGHT ACTIVITIES 1. Deter
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SIGAR OVERSIGHT ACTIVITIES is now t
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SIGAR OVERSIGHT ACTIVITIES Review L
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SIGAR OVERSIGHT ACTIVITIES indefini
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SIGAR OVERSIGHT ACTIVITIES their co
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SIGAR OVERSIGHT ACTIVITIES communit
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SIGAR OVERSIGHT ACTIVITIES advocate
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SIGAR OVERSIGHT ACTIVITIES remote o
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SIGAR OVERSIGHT ACTIVITIES The Cour
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SIGAR OVERSIGHT ACTIVITIES at both
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SIGAR OVERSIGHT ACTIVITIES restitut
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QUARTERLY HIGHLIGHT Louis M. Bailly
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SIGAR OVERSIGHT ACTIVITIES FIGURE 2
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QUARTERLY HIGHLIGHT Suspensions and
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QUARTERLY HIGHLIGHT appealed a susp
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SIGAR OVERSIGHT ACTIVITIES the Unit
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SIGAR OVERSIGHT ACTIVITIES identify
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3RECONSTRUCTION UPDATE 63
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RECONSTRUCTION UPDATE RECONSTRUCTIO
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RECONSTRUCTION UPDATE that project
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STATUS OF FUNDS STATUS OF FUNDS To
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STATUS OF FUNDS Security Forces Fun
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STATUS OF FUNDS Congress appropriat
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STATUS OF FUNDS ASFF BUDGET ACTIVIT
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STATUS OF FUNDS USAID INCLE State A
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DOD STATUS OF FUNDS CERP DOD DOD DR
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DOD STATUS OF FUNDS ESF USAID INTER
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STATUS OF FUNDS the United Kingdom
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SECURITY SECURITY KEY ISSUES AND EV
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SECURITY FIGURE 3.26 AVERAGE NUMBER
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SECURITY investigation concluded th
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SECURITY USFOR-A determined that
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SECURITY System for the ANA’s Nat
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SECURITY FIGURE 3.27 RS TRAIN, ADVI
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SECURITY DOD reported the ASSF in b
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SECURITY TABLE 3.8 ANDSF ASSIGNED F
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Page 113 and 114: SECURITY international scholarships
Page 115 and 116: SECURITY TABLE 3.10 COST OF U.S.-FU
Page 117 and 118: SECURITY Utility in Kabul ($314,325
Page 119 and 120: SECURITY An AAF specialist adjusts
Page 121 and 122: SECURITY According to USFOR-A, the
Page 123 and 124: SECURITY A Women’s Participation
Page 125 and 126: SECURITY announcement has provoked
Page 127 and 128: SECURITY as well as for civilians a
Page 129 and 130: GOVERNANCE GOVERNANCE KEY ISSUES AN
Page 131 and 132: GOVERNANCE U.S. RECONSTRUCTION FUND
Page 133 and 134: GOVERNANCE TABLE 3.14 USAID ON-BUDG
Page 135 and 136: GOVERNANCE the ARTF is the largest
Page 137 and 138: GOVERNANCE Of 59 conditions defined
Page 139 and 140: GOVERNANCE TABLE 3.15 USAID CAPACIT
Page 141 and 142: GOVERNANCE independent news and pub
Page 143 and 144: GOVERNANCE ministry of municipal af
Page 145 and 146: GOVERNANCE In January, the Wall Str
Page 147 and 148: GOVERNANCE TABLE 3.17 RULE OF LAW A
Page 149 and 150: GOVERNANCE ADALAT found in the cour
Page 151 and 152: GOVERNANCE without proper vetting o
Page 153 and 154: GOVERNANCE to the absence of design
Page 155 and 156: GOVERNANCE TABLE 3.18 USAID GENDER
Page 157 and 158: GOVERNANCE service is organized on
Page 159 and 160: ECONOMIC AND SOCIAL DEVELOPMENT ECO
Page 161: ECONOMIC AND SOCIAL DEVELOPMENT Agr
Page 165 and 166: ECONOMIC AND SOCIAL DEVELOPMENT $7.
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Page 189 and 190: ECONOMIC AND SOCIAL DEVELOPMENT TAB
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Page 197 and 198: COUNTERNARCOTICS opium-poppy cultiv
Page 199 and 200: COUNTERNARCOTICS UNODC estimates th
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Page 205 and 206: COUNTERNARCOTICS Community Based Ag
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Page 211: COUNTERNARCOTICS TABLE 3.6 INTERDIC
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OTHER AGENCY OVERSIGHT CONTENTS OTH
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OTHER AGENCY OVERSIGHT COMPLETED OV
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OTHER AGENCY OVERSIGHT U.S. Departm
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OTHER AGENCY OVERSIGHT Audit of Afg
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OTHER AGENCY OVERSIGHT equipment su
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APPENDICES AND ENDNOTES CONTENTS Ap
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APPENDICES APPENDIX A CROSS-REFEREN
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APPENDICES TABLE A.1 (CONTINUED) CR
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APPENDICES TABLE A.2 CROSS-REFERENC
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APPENDICES APPENDIX B U.S. FUNDS FO
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APPENDICES APPENDIX C SIGAR WRITTEN
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APPENDICES Ongoing Financial Audits
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APPENDICES APPENDIX D SIGAR INVESTI
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APPENDICES TABLE D.1 SPECIAL ENTITY
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APPENDICES TABLE D.1 (CONTINUED) SP
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APPENDICES TABLE D.1 (CONTINUED) SP
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APPENDICES ACRONYM OR ABBREVIATION
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ENDNOTES 1. Transparency Internatio
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ENDNOTES 100. General John Nicholso
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ENDNOTES 226. RS, email to SIGAR, 1
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ENDNOTES 380. UNMAS, Afghan Civilia
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ENDNOTES 483. Voice of America, “
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ENDNOTES 596. SIGAR, analysis of MO
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ENDNOTES 698. USAID, OI, response t
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ENDNOTES 794. UN, Report of the Sec
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A worker looks down on an Afghan va
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SIGAR

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