- A new electronic tax filing system in Afghanistan has made it easier and faster for taxpayers to file their taxes while ensuring transparency in the process.
- The e-filing system is among several reforms implemented by the Afghanistan Revenue Department to improve taxpayer compliance and curb corruption.
- The reforms are part of a government program to address corruption, improve management of public resources, and manage current economic and political risks.
Kabul—Over a year ago, the Afghanistan Revenue Department (ARD), housed in a four-story building on the eastern outskirts of Kabul City, was bustling with clients as they filed their taxes, waiting in long queues to process their tax payments. Today, only a few people can be seen ferrying documents between offices.
The entire process to file tax returns then often took several days, with taxes of only 40 to 50 people processed daily. Badee (name changed), an agent with a corporate tax processing firm, worked with 200 clients and had to go back and forth every day between his office and ARD, where he waited in long queues. “I had to travel for more than an hour to get to the revenue department, and sometimes mistakes on the forms meant I had to go through multiple procedures for days to rectify the mistakes,” he says.
In January 2020, this tedious process was abolished when ARD rolled out an e-filing system for processing taxes in the five provinces of Balkh, Herat, Jalalabad, Kabul, and Kandahar, enabling clients to file their taxes online. The new system allows clients to access their tax documents online and see the amount they should pay.
"The new e-filing system has helped enforce the tax law equally on every taxpayer and restricted the processors from favoring one taxpayer over another."
Director-General, Afghanistan Revenue Department
E-filing has streamlined the tax filing process by reducing the number of required supporting documents from 21 to just five, such as a company's license and balance sheet. “I am thankful that now I go to the revenue department once a year to get an electronic tax payment certificate,” Badee says.
Not only has e-filing shortened processes and reduced paperwork, it has decreased the opportunities for corruption and promoted transparency in tax filing. ARD Director-General believes that e-filing has helped curb corruption. “E-filing has reduced human errors and lowered instances of corruption because of the lack of personal contact as everything is processed electronically,” he says. “A tax processor doesn’t have a chance to ask for a bribe, and a taxpayer can't offer a bribe as e-filing automatically calculates the amount of tax each company has to pay. The new system has helped enforce the tax law equally on every taxpayer and restricted the processors from favoring one taxpayer over another."
Paying Taxes is Now Quick and Easy
Because of the high level of accuracy and ease of use, e-filing is mandatory for all large businesses, including telecommunications firms, airlines, state-owned enterprises, companies in the extractive industry, and banks. The representatives of these companies have received multiple training sessions by ARD on how to e-file their tax returns. Currently, nearly 1,200 out of 1,300 large taxpayers are registered as e-filers while the rest are undergoing training.
“Most large taxpayers have outsourced their tax filing to consulting companies, and we make it simpler for them to e-file on their behalf,” says the Client Service Director at ARD.
In addition, seven types of medium taspayers (taxpayers whose annual revenue (gross sales) is equal to or exceeding AFN 50 million but less than AFN 150 million over a period of 12 consecutive months) are required to e-file their returns, such as nonprofits, educational institutions, and tourism companies. Impressed by the ease of its use, many other medium taxpayers have expressed interest in receiving training in e-filing taxes.
The e-filing system will be expanded to all provincial tax offices and integrated with the Afghanistan Payment System, which aims to develop retail banking through electronic and mobile payment services. Moreover, the database of the Ministry of Commerce will be linked to the e-filing system, leading to a more transparent and faster taxpaying process. A monitoring mechanism is also being introduced to help boost performance in tax offices.
Reforms to Boost Performance and Fight Corruption
The e-filing system together with other reforms that are underway will help improve performance at tax offices and enhance taxpayers' compliance throughout the country. They are part of an Incentive Program implemented by the Ministry of Finance, which focuses on reforms to address corruption, improve the management of public resources, and manage current economic and political risks. These reforms include the development of e-payments, civil service reforms, access to finance, power sector reform, land titling, and water productivity, as well as an improved public investment management system, tax administration, and accountability of public finances.
The Incentive Program has helped expedite the implementation of e-filing, according to the Revenue System Director at ARD. “The benchmark was set to collect taxes using e-filing from all the provinces and we met it,” he says. “If it were not for the Incentive Program, we wouldn’t really have been able to meet the implementation deadline of 15 November 2020, and we would have faced a lot of problems.” He adds that the achievements in this field so far are “all due to the follow up done by the World Bank.”
The program is funded by the Afghanistan Incentive Program Development Policy Grant, which is supported by the International Development Association, the World Bank Group’s fund for the poorest countries, and the Afghanistan Reconstruction Trust Fund, a multidonor fund managed by the World Bank on behalf of 34 donors.