Afghanistan’s new value-added tax (VAT), under discussion by the nation’s parliament, has been commended by the International Monetary Fund.
Paul Ross, IMF Mission Chief for Afghanistan, said in a conference call that it is important for the country to maintain the proposed headline ten percent rate for the new VAT. He was speaking after the IMF’s Article IV consultation with Afghanistan, which was concluded on May 16, 2014.
The introduction of the VAT, which has faced delays, would be key to raising domestic revenue, which the IMF said is necessary for the country to achieve fiscal sustainability and to address social needs.
In December last year, US Aid pointed out that Afghanistan’s Central Asian neighbors have experienced annual revenue gains ranging from 2 percent to 8 percent of gross domestic product (GDP) owing to the introduction of a VAT.
On other areas of the tax regime, the IMF also welcomed new tax administration laws and a new sukuk law currently being progressed by Afghanistan’s parliament. It encouraged the authorities to promptly finalize a fiscal regime for the natural resources sector, and to refrain from granting investment incentives and tax exemptions.