U.S. officials are deeply concerned that corruption is reducing Afghanistan’s collection of customs taxes by as much as half, shorting the country’s primary source of revenue and raising concerns that the government may need to cut critical services in order to close budget shortfalls.
The U.S. Embassy in Kabul has raised warning flags to officials in Washington that the revenue problems are surfacing at an inopportune time, threatening renewed instability just as U.S. troops pull out of the country by year’s end from a decadelong occupation and a new Afghan president takes office.
State Department officials said they remain confident that the Afghan government will be able to maintain security and police forces at current levels, in part because the U.S. and its allies have committed to help fund a significant chunk of those activities for the next several years. But they candidly acknowledge the projected revenue shortfalls could have other serious consequences. “The new Afghan government will have to make difficult political decisions both to increase revenue and to reduce expenditures,” said Jarrett Blanc, deputy special representative for Afghanistan and Pakistan.
“Recent shortfalls in revenue collection are troubling, and reflect a number of factors, including a general slowdown in the economy,” Mr. Blanc said in a written statement to The Washington Times. “We have seen some steps by the Afghans in recent months to address domestic revenue collection, though there is much more work to be done. We say this with our eyes open. There is no question that corruption remains a fundamental challenge in Afghanistan.”
Mr. Blanc made the sobering assessment as the Special Inspector General for Afghanistan, the chief American watchdog over U.S. funds spent in the country, issued a report Tuesday that estimated as much as half of Kabul’s customs revenue was being diverted or lost to corruption.
“The scale and impact of corruption in Afghanistan’s customs process is difficult to quantify,” states the report by the congressionally mandated outfit known in Washington as SIGAR.
While collections by the Afghan Customs Department result in an income stream of $698 million to $1.1 billion — accounting for nearly half of all Afghan government revenue — SIGAR auditors noted that U.S. and Afghan officials believe those numbers “could potentially double” if rampant corruption is eliminated or significantly reduced.
Beyond aid from U.S. and other coalition nations, the Afghan government’s primary source of revenue comes from tax collections at the nation’s borders, including levies on people and equipment. SIGAR’s report noted that the collections accounted for 44 percent to 48 percent of the Kabul’s total domestic revenue stream in recent years.
Claiming that “approximately $60 million” is lost annually to commercial smuggling, the report pointed to the estimated loss of “$25 million annually for wheat and rice imports at a single customs location.” It also cited concerns that “criminal networks use intimidation to smuggle commodities,” and noted reported incidents in which Afghan customs employees were “kidnapped and intimidated” for working with U.S. advisers and “properly collecting customs duties.”
Training the Afghans
The U.S. Agency for International Development and the Department of Homeland Security’s Customs and Border Protection are engaged in an effort to aid and train Afghan authorities toward reforming their customs capabilities. In recent years, a U.S.-backed task force was created to “mentor” Afghan customs and border police at border control points and inland customs depots.
Although the efforts have born some impressive results — more than 7,000 training sessions were held from 2010 through 2013 and customs revenues have increased by 37 percent at Kabul airport — the SIGAR report raised questions about how U.S. officials calculate the success of their overall project.
“Mentors operate under contracts and subcontracts that do not contain performance metrics,” according to the report, which found that “contract documents” used by U.S. officials do not include “a single metric that defines specific, measurable goals” for the mentors to achieve.
The State Department came to the defense of USAID and other American agencies operating in Afghanistan on Monday.
“Revenue from customs has been the fastest growing segment, increasing over 400 percent since 2006,” Mr. Blanc said. “The U.S. government, through USAID and CBP, has helped the Afghan government develop a centralized customs collection system, contributing to the sharp increases in annual customs revenues.”
Mr. Blanc said that despite the challenges posed by corruption, the Afghan government’s overall ability to collect revenue has grown across the board by 20 percent per year since 2002, with total domestic revenue reaching nearly $2.1 billion during the 2011-12 fiscal year.
But, as impressive as those improvements may be, total revenue still falls far short of the estimated $4.1 billion that it costs to fund the Afghan National Security Forces — the establishment and training of which has been one of the crown achievements of the more than 12-year-long U.S. mission in the country.
Mr. Blanc, however, sounded a note of confidence that the security forces will remain financed, noting that the international community has made “substantial commitments and pledges” to financially support and train the forces “through Afghanistan’s transition.”
At a May 2012 summit in Chicago, high-level representatives from the U.S. and Afghan governments, along with others committed to the NATO-led security mission pushed through a declaration envisioning an Afghan National Security Force of 228,500 troops.
Under the declaration, the Afghan government agreed that by 2015 it would use its own revenue to cover at least $500 million of the estimated $4.1 billion to maintain the force annually. The other $3.6 billion will come from the U.S. and its allies, the declaration stated, with the aim of the Afghan government assuming, “no later than 2024, full financial responsibility for its own security forces.”
Some U.S. officials, speaking on the condition of anonymity in recent days, have raised concerns that the Afghan government may have to make painful cuts to civilian programs to meet the security force funding requirements laid out by the international community.
Mr. Blanc acknowledged Monday that Afghan leaders have tough choices ahead. But he noted that Kabul agreed during the Chicago summit, and at a conference in Tokyo in 2012, to a series of commitments that “would help the Afghan government address the fiscal gap, including reforms required to promote private sector investment, increase trade, and reduce corruption.”
Mr. Blanc also said that candidates in Afghanistan’s ongoing presidential election “have spoken to the need to advance an anti-corruption agenda.”
He also said the United States, and “our international partners, understand that Afghanistan will need significant financial support through this transition period.”