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80pc of Kabul-based trading units evade taxes

80pc of Kabul-based trading units evade taxes

Apr 08, 2017 - 14:56

KABUL (Pajhwok): Around 150,000 trade units including shops, banks and other commercial facilities operate in capital Kabulinfo-icon but most of them (80 percent) lack permits and do not pay taxes.

Officials at the Kabul Municipality say 216 trade units including banks, telecom companies, construction companies, commercial centres, transport, production, aviation, bakeries, carpentries, beauty parlors, engraving, health clinics and other manual trading have been identified in Kabul besides the thousands of tradesmen working under the shadows of these facilities. 

Under the urban revenue and services law, every trade unit shall obtain work permit and license for its activities.

The license is issued only once a year against 500 to 20,000 afghanis to trading units like shops.  Area, population and market are considered in the process. Work permits and licenses are renewed every year at the local municipality branch.

Bicycle mechanic shops, handicraft shops and barber shops are among units that should pay 500 afs to obtain or renew license every year.

According to the municipality urban services and revenue law, commercial units, civil technical services centres, car parking or selling units, electronic equipment, transport companies, telecom companies, production firms, petrol stations, restaurants, civil aviation companies should pay the permit fee ranging from 15,000 to 20,000 afghanis.

Municipality administrative units and level of law enforcement

A source at the municipality estimated at about 15,000 trade units operating in the 22nd municipality district of capital Kabul.

But Khair Mohammad Safdari, head of the municipality’s marketing section, said they lacked a proper system to tell exact number of trade units in the 22nd municipality districts of the capital.

He said they issued up to 12,500 permits to trading units but it indicated less than 20 percent of the trading units currently open and doing business in the city.

He said due to the lack of human resources and non-implementation of law, the municipality has been unable to determine the exact number of trading units in the city.

He, however, said it was estimated that some 62,500 trading units existed in the city and 50,000 of them were without work permit or license.

Safdari said: “The law is not respected and people’s strong resistance has rendered the municipality unable to cover trade units in 14th, 18th, 19th 20th and 21st municipality districts where most of the trading units were without work permit and license.”

He said an international organistion had been asked to establish a system through which work permit fee would be submitted to local banks. He said the system might be made active in the coming three months.

Comparison of municipality statistics with an estimates statistic based on investigation:

Head of the municipality marketing management estimated the number of commercial units in Kabul City at as many as 62,500.

But Pajhwok Afghan News’ findings show 45,000 commercial units such as shops and stalls exist in the fifth municipality districts alone.

The non-existence of data on trade units and unawareness of the municipality prompted Pajhwok to conduct an investigative report about the number of trading units in the city. The assessments were based on demography of the area and population.

Pajhwok team visited 17th municipality district also known as Kharikhana north of the city and third municipality district known as Kart-i-Char south of the city, 12th municipality district east of the city known as Arzan Qemat.

The team visited 13th municipality district known as Dasht-i-Barch west of the city and 16th municipality district known as Macroryan-i-Kuhna in the centre. The team counted every trading unit in these areas.

The counting of trading units was completed by Pajhwok reporter and two technical staff member team in 10 days.

Total 44,800 trading units were counted during the 10 days of investigation among them 10,918 are in the third municipality district, 3,317 in 16th municipality district, 10,852 in 13th municipality district, 9,663 in 17th municipality district and 10,050 in 12th municipality district. Most of these units don’t have work permit license, Pajhwok team learnt.

In the remaining 17 municipality districts, the first, second and 11th districts are much crowded areas and have more trading units. Mandawi, Jada Cinema-i-Pamir, Jada-i-Nader Pashtun and Leyci Maryam areas are among the crowded areas.

ChalSaton, Waselabad, Kart-i-Se that fall in the sixth and seventh municipality districts are less crowded and have fewer number of trading units.

When 44,800 units exists in five municipality districts, it shows there are 9,860 units in each district on average. If the formula is applied on remaining 17 municipality districts of the city it shows total 152,000 trading units existed in 17 municipality district of the capital city apart from five other municipality districts.

Violation of municipality laws, weak administration and business without permit

Mohammad Nabi Rahimi, the chief for 13th police district of Kabul, said that his district had issued licenses to around 4,000 shops. However, he said the process of license issuance faced serious problems.

Calling license procedure for trade units as unfair, he said: “Based on the regulation, a shopkeeper who has seven million afghanis worth goods, and a shopkeeper who has 20,000 afghanis asset, both pay equal amount of money for license. This is the only reason shopkeepers do not take licenses”

Bashir Ahmad, revenue director for the fourth police district of Kabul, said, “A number of shopkeepers are unaware about the municipality law and they do not apply for license.

Safiullah Abdi, chief of 12th police district, said: “Afghans enjoy escaping from the law, some shopkeepers do not have licenses, but we will seriously follow the licensing process this year.”

Haji Zaman, who owns a food items store in Jamal Mina of fourth police district, said: “Three years ago two officers from the municipality came here and explained license issuance process to me. It was very complicated and I started paying them 200 afghanis each month instead of taking license.”

Noor Bahadar, a shopkeeper in Tapa-I-Salam area of third municipality district, said “I have license, I pay 2,000 afghanis each year, but municipality officers demand more money under different pretexts.”

“In other countries, municipalities provide needed services to people in return for taxes, but unfortunately our municipality does nothing but demands taxes,” he said.

Obaid Naseri, who owns a mobile phone shop in the 16th police district, said “We have the license but the municipality still takes extra money, they come up with different issues, if we do not pay them the extra money, they shut our shop.”

Abdul Matin, a shopkeeper in Arzan Qimat area, said he opened his footwear shop seven years ago and was yet to obtain license.

“Sometimes municipality officers come here and ask for license, but we pay them 100 afghanis as fine and they go back.”

Wahab Hussaini, who owns a diary store in Qala-i-Zaman Khan of 16th police district, also said he have no license.

“I have 20,000 afghanis in capital, so I cannot pay 2,500 afghanis annually in tax. The amount of tax should be based on a shopkeepers capital,” he said.

Mohammad Ariz, who has a shop in Mahtab Qala area, said municipality took around 50 to 100 afghanis each month from him despite paying for license.

“The municipality takes money from us for three things --- shop running, its services and billboard,” he said.

He said most of his neighboring shopkeepers had no licenses and they paid bribe to municipality officers each month. “We will never take licenses until we know what services the municipality provides in return of our taxes,” he added.

Artisans National Association (ANA) said that obtaining a license was a complicated process and an trade units owners have to pay bribe to obtain the license.

Abdul Latif Salehi, a member of the ANA, told Pajhwok that license issuance by the municipality was a very complicated process that resulted into corruption.

“Complication and corruption in issuing license has caused most of shopkeepers to deny obtaining license or work permit, it paved the way for municipality workers and policemen to illegally take money from trade units owners,” he said.

Farhad Seddiqi, a member of the communication and municipality commission of the Wolesi Jirga, said, “We also received complaints on this issue that officers asked for extra money from shopkeepers despite trade units owners have license and they paid the due amount to the municipality.”

“Kabul municipality is full of corruption, reform is essential in this department, no one should be allowed to take municipality budget to their own pockets,” he said.

He also said that complication of license issuance had paved the ground for corruption and most of shopkeepers escape to take it.

The problem could be solved if the tax payment processed through electronic system, Seddiqi said.

“People are right when they say the municipality did not serve the city, so municipality has to work hard and provide services to the people in order to convince them to get licenses and pay the due amount,” he said.

However, Kabul municipality spokesman, Jalil Sultani, confirmed a number of trade units did not take licenses and did not pay taxes and said that electronic system for the collection of taxes would be activated in all areas of Kabul in the next one month.

He said all the equipment of the system had been provided with the help of Democracy International (DI) to 22 police districts of the capital. A number of officers would be also trained for the usage of this system, Sultani said.

Kabul municipality would also task a specific team to oversee the electronic tax collection system, he said. He assured all problems would be resolved once the system was made functional.




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