Dysfunctions
Afghanistan Strategy Must Address Endemic Kleptocracy
By James Durso, RCD, December 11, 2017
Dec 12, 2017 - 11:00:26 AM

American bank robber Willie Sutton, when asked why he robbed banks, allegedly replied, "Because that's where the money is." Afghanistan’s predatory Ministry of Finance looks at foreign contractors the same way, which is why it improperly levied over a billion dollars in taxes on contractors supporting U.S. efforts in Afghanistan.

Since 2001, the U.S. has spent $841 billion in Afghanistan, of which $120.8 billion was for “relief a>

American bank robber Willie Sutton, when asked why he robbed banks, allegedly replied, "Because that's where the money is." Afghanistan’s predatory Ministry of Finance looks at foreign contractors the same way, which is why it improperly levied over a billion dollars in taxes on contractors supporting U.S. efforts in Afghanistan.

Since 2001, the U.S. has spent $841 billion in Afghanistan, of which $120.8 billion was for “relief and reconstruction,” but really was for building - not rebuilding - the infrastructure and institutions of the country. And it’s not just the money: almost 2400 U.S. soldiers and civil servants have died, and over 20,000 have been wounded. On the contractor side, over 1700 died and over 37,000 were injured.

Afghanistan is effectively bankrupt as the international community funds over 70% of its budget, and the country lingers at the bottom of the corruption league tables, in 2016 being ranked 169 of 176 countries by Transparency International, a slight improvement over 2015. 

This dismal condition is not something Afghanistan’s leadership can blame on the Taliban or “rogue midlevel officials” when most cabinet officials routinely ignore declaring their financial assets as required by law.

Into this toxic environment comes reconstruction contractors that appear cash-flush to Afghan officials anxious to supplement the state’s coffers, line their pockets, or divert funds to political allies, likely including warlords or the Taliban, who have been implicated in the narcotics trade.

How did this happen?

The governments of Afghanistan and the United States entered into several agreements, such as the “Bilateral Security Agreement,” that specifically exempted contractors supporting the U.S. effort from local taxation: “United States contractors shall not be liable to pay any tax or similar or related charges assessed by the Government of Afghanistan [GoA] within the territory of Afghanistan on their activities, and associated income, relating to or on behalf of United States forces under a contract or subcontract with or in support of United States forces.”
Kleptocratic GoA officials promptly ignored the agreements and extorted tax payments from prime contractors and declared that the agreement did not apply to sub-contractors. Contractors that didn’t comply were imprisoned or threatened with prison.
The U.S. government let the Afghans get away with it.

Why doesn’t the U.S. government support the contractors it needs to build Afghanistan?

The multiplicity of Defense Department contracting offices, most located in the U.S., lack the understanding of local taxation and are generally unwilling or unable to assist contractors regarding matters regarding host nation taxation. Contracting officers in Afghanistan are transferred every year and are only starting to understand their jobs when they depart.
U.S. officials entertain a false notion of Afghanistan’s “sovereignty.” Afghanistan is not so much a country as a protectorate of the international community, specifically the U.S. military. That senior-subordinate relationship has not yet been impressed on Afghan officialdom.
The absence of condition-based aid. Although the GoA is almost entirely dependent on international donor funds, most of them courtesy of American taxpayers (including payment of GoA salaries), no significant funding, out of the hundreds of billions spent for Afghanistan, has ever been withheld until corrupt behaviors were stopped. The Afghans do not bear any risk when they ignore U.S. concerns about their corruption.
Illusions of a “grand strategy.” The tax problems of U.S. contractors are of little concern to some U.S. officials who think the U.S. has vastly larger concerns in the world and South Asia. What these self-regarding bureaucrats forget is that America’s reluctance to bring its Afghan client to heel is noticed by regional competitors Russian and Iran. And by the Taliban

What is to be done?

The executive branch is unable or unwilling to assist the contractors that are critical to mission success, so Congress needs to step up and impose some pain on all parties until they solve the problem to America’s satisfaction.

To start, Congress can:

Require the State and Defense departments to prepare an unclassified report to Congress of the true state of the problem, and name the GoA officials who are complicit in the improper levies.  
Mandate the State Department deny visas to any Afghan officials involved in the improper levies, up to and including the Minister of Finance. The same officials can also be referred to the Office of Foreign Asset Controls for consideration as Specially Designated Nationals if there is evidence they are cooperating with the Taliban or narcotics traffickers, and to the Internal Revenue Service if they or their families hold assets in the U.S. or are U.S. persons.
Remind the U.S. officials tasked with solving the problem that they will not be considered for any Senate-confirmed positions until they report verifiable success.
Decrement future grants to the GoA by the amount of tax improperly levied.

Afghanistan has vast potential, but first, it must shed its kleptocratic culture – that starts at the top – if it is ever to succeed. Congress should take the opportunity to help put Afghanistan on the straight path.