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Afghanistan

Electronic Revenue Collection System (AF0023)

Overview

At-a-Glance

Action Plan: Afghanistan Action Plan 2019-2021

Action Plan Cycle: 2019

Status: Active

Institutions

Lead Institution: Independent Directorate of Local Governance and Kabul Municipality

Support Institution(s): Ministry of Finance, related CSOs

Policy Areas

Capacity Building, E-Government, Fiscal Openness, Local Commitments, Publication of Budget/Fiscal Information, Tax

IRM Review

IRM Report: Afghanistan Design Report 2019-2021

Starred: Pending IRM Review

Early Results: Pending IRM Review

Design i

Verifiable: Yes

Relevant to OGP Values: Access to Information

Potential Impact:

Implementation i

Completion: Pending IRM Review

Description

What is the public problem that the commitment will address?
In 153 active municipalities across Afghanistan none has electronic revenue collection system. Revenue collection process is lengthy, time consuming and some aspects opaque. This problem is more persistent in major cities. Lack of proper method to monitor revenue collection and expenditures of municipalities caused partial loss in the revenue generation of these municipalities. Corruption in some municipalities resulted to dissatisfaction of 70% of public.

What is the commitment?
Developing electronic revenue collection system for municipalities ascertains civic participation in a productive scrutiny. With civic participation transparency and accountability would be promoted and corruption can be declined. Quality service delivery to public could be ascertained by elimination of corruption

How will the commitment contribute to solving the public problem?
Municipalities’ revenue collection system ensures transparency and public scrutiny off revenue collection and expenditure with in these authorities. System will be enabled to report; on the basis of revenue type, district and other relevant aspects. Application of this system will promote transparency, accountability and unfold trust of public in the municipalities. Through implementation of this commitment certain changes are expected in municipality revenues and they deliver the best services to public with the collected revenues. System will generate various reports to public and CSOs from revenue collection to monitoring and expenditure of revenues. Reports will have to be generated monthly, quarterly and annually and be generally accessible.

Why is this commitment relevant to OGP values?
This commitment is related to all OGP values. Through E-revenue collection system, harness of technology will be ascertained. After implementation of this commitment public can refer to portal and access the accurate revenue data and information. In the event that, data is not accurate or dissatisfactory public can advocate which promotes civic participation, transparency and accountability in the municipalities.

Additional information
Municipalities Law, Annexures no. 1 and 4 municipal services law, Guild bills, Commercial and residential tax regulation, Procedures to consolidate spare lands rent.

IRM Midterm Status Summary

10. Develop Electronic System for Revenue Collection of Five Municipalities (Metropolitan Cities: Mazar, Herat, Kandahar, Jalalabad and Kabul)

Developing electronic revenue collection system for municipalities ascertains civic participation in a productive scrutiny.

With civic participation transparency and accountability would be promoted and corruption can be declined. Quality service delivery to public could be ascertained by elimination of corruption.

Main Objective

Municipalities’ revenue collection system ensures transparency and public scrutiny off revenue collection and expenditure within these authorities. System will be enabled to report; on the basis of revenue type, district, and other relevant aspects. Application of this system will promote transparency, accountability, and unfold trust of public in the municipalities. Through implementation of this commitment certain changes are expected in municipality revenues and they deliver the best services to public with the collected revenues. System will generate various reports to public and CSOs from revenue collection to monitoring and expenditure of revenues. Reports will have to be generated monthly, quarterly, and annually and be generally accessible.

Milestones

  • Budget, manpower, and data gathering for system.
  • Analyze, design, and develop the system.
  • Pilot the system in five major cities and conduct municipalities staff training.
  • Implement the system in five metropolitan cities (as mentioned in the title).
  • Public awareness on system usage of system in five major cities.
  • Present monthly and quarterly reports.

Editorial Note: For the complete text of this commitment, please see Afghanistan’s action plan at https://www.opengovpartnership.org/wp-content/uploads/2020/01/Afghanistan_Action-Plan_2019-2021_EN.pdf.

IRM Design Report Assessment

Verifiable:

Yes

Relevant:

Access to Information

Potential impact:

Minor

Commitment Analysis

This commitment aims to enhance the quality of public revenue collection and raise awareness of revenue information in five major municipalities: Mazar, Herat, Kandahar, Jalalabad, and Kabul. It will achieve this by developing an electronic revenue collection system. The Independent Directorate of Local Governance and the Municipality of Kabul will lead the implementation of this commitment, with support from the Ministry of Finance and relevant civil society organizations. Prior to its inclusion in the action plan, a large part of this commitment had already been implemented.

Despite provisions in the Municipalities Law outlining the role of citizens in monitoring the accountability of municipalities, [120] public participation is still not incorporated into the process of municipality revenue collection and budget implementation. Civil society has also expressed concerns over the lack of transparency and accountability in the budget process. [121]

To address these concerns, the government has committed to introducing the Law on Municipal Revenue Collection. The law, which is currently in draft form, would regulate the calculation and collection of revenue at the municipal level and consider existing regulations from the Municipalities Law, the Income Tax Law, and other relevant legislations. In December 2019, a discussion on the draft law was organized by the Independent Directorate of Local Governance and involved the National Network of Municipal Revenue Managers. [122]

Across Afghanistan, there are 185 provincial- and district-level municipalities whose administration is coordinated by the Independent Directorate of Local Governance. Kabul municipality reports directly to the Office of the President. Each of these municipalities generates and collects their own revenue, which comes mostly from the provision of basic services. In the majority of municipalities, revenue collection is conducted manually by a localized Department of Taxation. [123] Citizens could either visit the municipality’s office to receive instructions for payment via bank transaction or wait for municipality officials to visit their homes and collect payments in cash. [124]

As reported in a 2017 study by the Afghanistan Public Policy Research Organization, [125] corruption in the municipal revenue collection process is a systemic and complex problem. The study found, for example, that bribes are prevalent in the revenue collection process, mainly to speed up the process or to reduce the amount of payment. [126] In addition, the arduous and unclear process often leaves citizens with no other option than to resort to graft. [127]

The lengthy, inefficient revenue collection process, compounded by the rampant corruption, continues to discourage citizens from complying with their civic responsibility to make tax payments. The lack of transparency and low tax payment compliance result in low revenue collection for municipalities, which, in turn, could render the municipalities incapable of delivering public services. [128] Overall, the director of the Revenue Collection Division of the Independent Directorate of Local Governance estimates these problems have adversely affected the delivery of 50 to 60 percent of public services at the municipal level. [129]

Concurrently, some bigger cities have already started to adopt new technology to simplify this otherwise arduous manual process. In 2013, the government of Afghanistan developed an Integrated Financial Management System (IFMS) in a number of big cities. Using it, citizens could register with their personal information and receive their payment order automatically online. [130] This registry could then be used to process their payment to the municipality administration at a bank. As of 2019, this system has been used by 17 provincial municipalities, although its current maximum capacity allows for 300 municipalities. [131]

Through this commitment, the government aims to ensure that all municipalities use the system to improve their revenue collection processes. The Directorate also plans to monitor all municipalities’ performance on revenue generation, allocation, and expenditures through monthly and quarterly reporting. Through these reports, the Directorate would be able to assess any new challenges that hamper efficiency and identify gas and solutions for the future. [132] The reports will also be made available for public access through the websites of the Ministry of Finance and the Independent Directorate of Local Governance. [133] This commitment is thus relevant to the OGP value of access to information.

This commitment could have a minor potential impact on improving the revenue collection system at the municipal level. The expansion of IFMS across all municipalities could help address many challenges that come with the current manual, paper-based revenue collection system. For one, the latter tends to be a very lengthy process, [134] and therefore it requires citizens to spend a lot of time going to the municipality’s office, to the bank, and so on. The IFMS could also help rein in the estimated 20–30 percent of corruption stemming from the manual calculation process. [135]

In the 17 municipalities that have already implemented the IFMS, the Directorate has observed positive early success. Public attitudes and perceptions of the revenue collection process have improved and contributed to a 20–30 percent increase in municipal revenue, [136] as citizens comply more with their tax payment duties. However, the Directorate has also reported that the enhanced efficiency has led to a wave of government resignations, allegedly as there is less opportunity for government officials to take advantage of the manual system. [137]

It is important to restate the limitations associated with limited internet penetration in Afghanistan, which restricts the scope of an online system such as IFMS and compromises the value of publishing performance reports online.

Despite this limitation, the commitment offers a possible, if incremental, solution to increasing the revenue of municipalities through higher tax payment compliance. It does not, however, fully address overarching concerns with the lack of transparency and accountability of related processes. The process to develop the IFMS was already implemented prior to the development of this action plan, which further limits the scope of this commitment.

In other words, this commitment—through the proposed publication of revenue-related information—marks a positive, incremental step in improving the transparency and accountability of revenue collection. However, the expansion of IFMS is unlikely to solve all the problems associated with municipal revenue collection. To ensure a higher potential impact, the government would need to look at the revenue collection system as a whole and implement enforceable measures to sustainably prevent irregularities in the process.

Going forward, the Directorate and the Ministry of Finance could consider specifying the type and extent of information that municipalities should disclose in monthly and quarterly reports. This type of reporting is in line with suggestions from civil society, which outlined that these reports must clearly classify revenue streams from each area of service, its size, etc. [138] Such information is currently not publicly available. The government could also consider raising awareness about taxation obligations, citizens’ right to information on revenue collection and usage, and the role they stand to play in deciding how the municipality budget is allocated. The use of offline channels to supplement online disclosure of such information will also expand the reach of this commitment.

[120] Law of Municipalities, Government of the Islamic Republic of Afghanistan, pp. 173, 180.
[121] Integrity Watch Afghanistan, interview by IRM researcher, 7 June 2020.
[122] “The Draft Municipal Revenue Law Was Discussed,” Independent Directorate of Local Governance of the Islamic Republic of Afghanistan, 2019, https://idlg.gov.af/7618/.
[123] Integrity Watch Afghanistan interview.
[124] Mohammad Amin Tokhi (Independent Directorate of Local Governance of the Islamic Republic of Afghanistan), interview by IRM researcher, 8 June 2020.
[125] Afghanistan Public Policy Research Organization, Re-conceptualizing Corruption in Afghanistan: An Institution of Bad Governance, 2017, https://appro.org.af/wp-content/uploads/2017/05/2017-05-08-Reconceptualizing-Corruption-in-Afghanistan.pdf.
[126] Ibid., p. 20.
[127] Ibid., p. 25.
[128] Ibid.
[129] Ibid.
[130] Ibid.
[131] Ibid.
[132] Ibid.
[133] Integrity Watch Afghanistan interview.
[134] Ibid.
[135] Ibid.
[136] Ibid.
[137] Ibid.
[138] Ibid.

Commitments

  1. Revise Law on Recruitment and Authority of Attorneys General

    AF0014, 2019, Access to Justice

  2. Revise Law on Local Government

    AF0015, 2019, Legislation & Regulation

  3. Establish Anti-Corruption Commission

    AF0016, 2019, Anti-Corruption

  4. Draft Beneficial Ownership Legislation

    AF0017, 2019, Anti-Corruption

  5. Portal for Processing Legislative Documents

    AF0018, 2019, Capacity Building

  6. CSO Monitoring of Education

    AF0019, 2019, E-Government

  7. Develop Electronic Complaint System for Local Government

    AF0020, 2019, Capacity Building

  8. Reform and Strengthen Education Data

    AF0021, 2019, Access to Information

  9. Participation in Local Budgeting

    AF0022, 2019, Fiscal Openness

  10. Electronic Revenue Collection System

    AF0023, 2019, Capacity Building

  11. Co-Create University Curriculum

    AF0024, 2019, Education

  12. Reform Promotion System for Police Officers

    AF0025, 2019, E-Government

  13. Monitoring Framework for Medicine Wholesalers

    AF0026, 2019, E-Government

  14. Monitoring of Private and Public Health Centers

    AF0027, 2019, E-Government

  15. Participation in National Budget

    AF0028, 2019, Fiscal Openness

  16. Open Justice for Anti-Corruption

    AF0029, 2019, Access to Justice

  17. Women's Empowerment Plan

    AF0030, 2019, Gender

  18. Establishment of Women Grand Council

    AF0031, 2019, Gender

  19. Law on Processing, Publishing and Enforcing Legislative Documents

    AF0002, 2017, Legislation & Regulation

  20. Courts to Address Violence Against Women

    AF0003, 2017, Access to Justice

  21. Public-Police Partnership Councils

    AF0004, 2017, Capacity Building

  22. Registering Assets of Government Officials

    AF0005, 2017, Anti-Corruption

  23. Scheme for Establishing Health Service Accreditation Entity

    AF0006, 2017, Capacity Building

  24. Urban Improvement National Policy

    AF0007, 2017, Infrastructure & Transport

  25. Protection Policy for Women Under Conflict and Emergency Situations

    AF0008, 2017, Fiscal Openness

  26. Civil Society Monitoring Plan for Education and Higher Education

    AF0009, 2017, Education

  27. Plan for the Establishment of a Joint Committee Overseeing the Implementation of the Anti-Corruption Strategy

    AF0010, 2017, Anti-Corruption

  28. Strengthen the Information Mechanism in 60 Governmental Agencies

    AF0011, 2017, Access to Information

  29. Starred commitment Implementing Open Contracting

    AF0012, 2017, Access to Information

  30. Starred commitment Public Participation in Road Network Projects

    AF0013, 2017, Infrastructure & Transport

  31. Starred commitment Mechanism of Public Partnership in Inspection Process

    AF0001, 2017, Anti-Corruption

Open Government Partnership