US Wasting Millions Trying To Get Afghanistan To Collect Import Taxes Electronically

A program to help Afghanistan collect import duties electronically could be wasting more than $100 million of taxpayer money, government investigators claim in a report released Tuesday.

The U.S. Agency for International Development (USAID) is three years into a four-year project to help Afghanistan officials use electronic methods to gather custom duties instead of cash, but the program has mostly been a failure, according to the Special Investigator General for Afghanistan Reconstruction (SIGAR).

USAID tapped Chemonics, a for-profit development company with numerous USAID and State Department contracts, to implement an e-payment system in Afghanistan under the Afghanistan Trade and Revenue program.

As one part of the $77.8 million program, Chemonics and USAID established a goal of collecting 75 percent of all custom duties electronically by November of 2018. The project started in November 2013, and had a $77.8 million budget.

“Our review found that by the end of December 2016, less than 1 percent…of all custom duty collections were being collected
electronically,” John Sopko, head of SIGAR, said in the reports.

Most duties are collected in cash in Afghanistan, and transported from customs offices to central locations, an inefficient and dangerous way to ensure the Afghanistan government gets its money.

The e-payment system was supposed to address these concerns, but needed the support of Afghanistan officials, and the willingness of traders to adopt the new system.

The cash-based system also makes corruption easy. SIGAR reported earlier that roughly half the duty fees Afghanistan collected in 2013 went to corrupt officials.

Another obstacle to bringing customs payments online is the incentive of Afghanistan’s national bank, which still processes many duty transactions despite a 2005 law that forbidS them from doing so. Chemonics may have been “unaware” of the “difficulty of removing Da Afghanistan Bank from the lucrative cash-based customs process” when it set the 75 percent goal, one official told SIGAR.

This is not the first time an e-payment initiative sponsored by the U.S. has failed. USAID first brought Chemonics in to implement an e-payment system in 2009 for a four-year program as part of an $83 million contract, but that initiative failed to achieve its goal — which was also to complete 75 percent of duty transactions electronically.

During the second year of the program, electronically collected duties actually decreased. Of the $954 million in duties Afghanistan collected in 2014, only $4 million came from electronic transactions. In 2013, the first year of the new four-year program, Afghanistan electronically collected $6.42 million of the total $870.63 in duties.

SIGAR suggested that Chemonics should ultimately be held responsible for the program’s lack of results, and USAID agreed. The contract states that if the project is failing to meet goals, the contractor should readjust its approach, and Chemonics did not do that.

Chemonics and USAID did change its metrics considerably after the first two years. Chemonics and USAID significantly revised the revenue generation targets downward for the first three quarters of program year four “because the program failed to achieve any of the revenue generation targets established for year three,” which ended in late 2016.

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