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Afghanistan targets US defence contractors in row over back taxes

Afghanistan is threatening to crack down on US defence contractors it says owe hundreds of millions of dollars in back taxes, including by freezing their bank accounts and refusing to renew yearly business licences when they expire.



Kabul: Afghanistan is threatening to crack down on US defence contractors it says owe hundreds of millions of dollars in back taxes, including by freezing their bank accounts and refusing to renew yearly business licences when they expire.

The United States disputes some of the payment demands, saying companies were exempt under military agreements in force at the time, and both sides are trying to resolve the dispute before the deadline set in a new deal between the nations.

It has been extended by three months to Sept. 1.

Major defence firms targeted include Raytheon, DynCorp International and Supreme Group, and they provide vital services to NATO forces, diplomatic missions and the aid sector.

"If their tax position has not been cleared, we cannot issue licences," deputy finance minister for customs and revenue, Gul Maqsood Sabit, told Reuters, referring to all companies being looked into.

"We do not want to affect the movement of goods to the US military because they are fighting a war... (but) if it comes to it, we will go all the way to Interpol," he added.

Sabit did not specify why Afghanistan might approach the international police organisation, but did say tough measures including travel bans for executives could be imposed on companies that did not agree to pay.

One of the finance ministry`s main targets, Supreme Group, is pulling out after its existing contracts end this year, although it did not give a reason.

The size of the Afghan market for foreign contractors has shrunk significantly in recent years after the US-led NATO force went from more than 100,000 at its peak to 9,800 soldiers now who train local forces and carry out limited operations.

But supporting the mission is still a sizeable business, and other firms want to continue if the tax row is resolved. Over $20 billion is estimated to have been spent on US Department of Defense contracts in Afghanistan from 2002 to 2014.

For Kabul, the dispute presents tough choices.

On the one hand, with revenue badly needed to run the country, significant tax payments would be welcome. Afghanistan has also sought to reassert control over areas of the economy dominated by foreign companies and aid groups.

On the other, it relies heavily on US Department of Defense contractors, of which there are around 30,000.

It is difficult to switch contractors, because "the US military has strict contracting procedures," said Sabit. "My problem has always been with contractors; they do not behave."

The companies involved say the U.S. government is leading negotiations.

"This is a policy dispute regarding tax exemptions between the US and Afghan governments. We are aware that both governments are working toward a final resolution," said a spokeswoman for DynCorp.

A US official in Kabul said liabilities varied by firm, and Washington was working to ensure the law was applied fairly. 

"We insist that the government carefully apply relevant exemptions as provided by relevant bilateral agreements between the US and Afghanistan," the official said.

From Zee News

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