The Afghan government is risking another confrontation with the United States by seeking to tax foreign companies operating in the country. American officials say contracting companies are “tax exempt” in accordance with the U.S. law and bilateral agreements with Afghanistan. But Afghan officials say the agreements were “imposed on Afghanistan in 2002 and 2003,” and that they are now “trying to modify them.”
The Washington Post reports that Afghanistan’s Ministry of Finance has sent out “overdue tax bills and has threatened some U.S. companies with arrests, loss of licenses and confiscation of aid goods.” In response, the Defense and State departments have simply advised the contractors to ignore the bills and “stand up for our rights.” According to the Post, the wording in the bilateral accords on the issue is “vague,” and the two governments disagree on what “tax exempt” means.
Afghan Finance Minister Omar Zakhilwal is behind the current push for taxation. His troubled relationship with U.S. ambassador in Afghanistan Karl Eikenberry means that there is no senior American official in Kabul to work with him to defuse the tension. Richard Holbrooke, U.S. special envoy to Afghanistan and Pakistan, died last month. Zakhilwal had declared in the past that he did not trust the U.S. ambassador.
Relations between the two broke down after last month’s WikiLeaks disclosures in which Eikenberry quoted Zakhilwal as calling Karzai an “extremely weak man.” Zakhilwal denied the report and accused the ambassador of “misquoting” him to defame Karzai and advance his “own agenda.” He offered his resignation, but Karzai did not accept it. He warned that the American ambassador had “lost credibility” and that the relationship between the Afghan government and the American embassy would not be “business as usual.”
The emerging tension is the latest in a series of public confrontations between Afghan and U.S. officials over the past two years. The controversy over President Karzai’s order to disband private security firms is still unresolved. Disagreements between the two governments over private security companies and taxation of foreign companies have existed for many years. However, the fact that behind-the-scenes disagreements are now turning into heated public confrontations indicates a decline of the U.S.-Afghan partnership and Washington’s decreasing leverage with Kabul.
Ties between the Karzai administration and U.S. diplomats were badly damaged after the November 2009 leak of a classified diplomatic cable in which Eikenberry had counseled against the surge of troops in Afghanistan because Karzai was not “an adequate strategic partner.” During Afghanistan’s 2009 presidential election, Eikenberry’s frequent meetings with Karzai’s rivals led the Afghan president to think the White House was trying to dethrone him. A cable disclosed by WikiLeaks shows Karzai’s suspicion of U.S. officials during the elections even led him to ask his defense minister if he could “manage without the United States” to fight the Taliban.
The deficit of trust between the Afghan and U.S. officials is hampering political progress and creates new obstacles in Afghanistan. While the surge of 30,000 troops is beginning to show progress in southern Afghanistan and areas around Kabul, the administration’s current diplomatic strategy is failing. While military efforts are a precondition to victory in Afghanistan, the administration needs to forge an effective partnership with the Afghan government to improve governance, create political stability, tackle corruption, and mobilize a political will in Afghanistan to defeat the Taliban. Improving the partnership will require a reshuffle of senior American civilian officials in the country.
Ahmad Majidyar is a senior research associate at the American Enterprise Institute.