3m - AF 12 - WS II - Binder - DE - PW1 - Reading2 - Proposal … 12... · Eng.!Sahrif!Hasimi!...

UNITAR Fellowship for Afghanistan: 2012 Cycle | Workshop II

15 – 18 July 2012 | Abu Dhabi | United Arab Emirates

READINGS | TAXPAYERS EDUCATION PROGRAMME

Islamic Republic Of Afghanistan

UNITAR Hiroshima Fellowship for Afghanistan 2010 Cycle

Group Project “Taxpayers’ Education Program”

Group coach: Mr. Akbar Hamidi

Submitted By Members Group #3 Maiwand Akbari

Nasir Figar Najeeb Ahmadzai

Mr. Ilham Eng. Sahrif Hasimi

Eng. Farkhunda Ghoussy

Date: 25th Oct, 2010




Abbreviations ARD Afghanistan Revenue Department

MOF Ministry of Finance

GOA Government of Afghanistan

LTO Large Taxpayers’ Office

MTO Medium Taxpayers’ Office

STO Small Taxpayers’ Office

SWOT Strengths Weaknesses Opportunity and Threats

WBS Work breakdown Structure

ITR Income Tax Return

ITL Income Tax Law

PLM Project Logical Model




1: Background In 2001 after Bonn Agreement new government was established in Afghanistan. New government decided to formulize, centralize and make transparent all revenues and income from different sources like customs incomes, road taxes, cities taxes and businesses and commercial taxes, which was collected by local governors and warlords for their own interest. In the beginning the incomes was less than US 100 millions to the central government but later these amount increase and last year it about US 1.51 billions. Ministry Finance of Afghanistan is the government entity that handling taxation issues all around Afghanistan. From 2002 until now the MoF has been trying to manage the financial and revenue problems in the country. For this purpose Afghanistan Revenue Department is the entity to within the MoF that handling this matter. Afghanistan Revenue Department is tax collecting authority, responsible for the collection of various types of taxes levied over various sectors of the economy. Revenues generating departments are always of importance for every nation and are considered as the backbone. Finances or cash is the life blood of every organization weather public or private, so this means that Afghanistan Revenue Department is generating the blood( revenue) for the effective functioning of the whole body i-‐e Afghanistan. But unfortunately it is not able enough to meet the total blood (revenue) need of this body (Afghanistan) for which the Government of Islamic Republic of Afghanistan is in need to fulfill the remaining need from foreign loans and grants. So for this purpose it’s the mission of ARD to become self-‐sufficient in terms of fulfillment of overall budget requirements of Islamic Republic of Afghanistan through implementation of transparent and public oriented procedures.

2: Stakeholder of Afghanistan Revenue Department: Afghanistan Revenue Department as previously stated is of core importance because it plays role of engine that drives the rest of the departments. This is general phenomena that all those departments that are of importance have many stakeholders. Similarly ARD being an important department has also many stakeholders, which are as follows.

• Taxpayers both national and international • Employees of ARD • Other Govt departments • International donor agencies • Representatives of other countries/embassies, missions. • Common men of Afghanistan

ARD consider each and every stakeholder equally important and that’s why many reforms are taking place that will help each and every stakeholder. But apparently for the purpose to achieve the annual revenue targets or its mission the employees of ARD and the taxpayers are directly involved and hence are of major concern for ARD.

3: Project Brief: As described in below section the scope or the target taxpayers of this project that this project is aimed to target taxpayers of LTO and MTO located in Kabul city. Taking into consideration the requirements and variables identified in the assessment the project will be aimed at covering the three problem areas that are:

• Filling and filing of Return • Income Tax Law • Basic Accounting Principles associated with how to fill the Income tax return

For the purpose to cover all these three areas during the course it’s been decided that week long training is to be administered to representatives of the companies. There are possibilities that this duration might decrease before




starting the course after proper consultation with the taxpayers. The teaching method to be used will be of interactive as well as of lecture form, basically for the purpose to answer maximum questions if any of the taxpayers and to impart the curriculum designed.

4: Scope of this Project: The project is a pilot project to be implemented for selected taxpayers of Kabul only. There are three tax offices in Kabul which are as under Small Taxpayers office Medium Taxpayers office Large taxpayer’s office The scope of this project is to target the taxpayers related to LTO and MTO situated in Kabul only. Moreover since the LTO taxpayers are more educated being big companies therefore the major concentration will be over MTO taxpayers.

5: Why this Project: Taxpayers of the Afghanistan Revenue Department (ARD) of Ministry of Finance are facing problems and challenges due to lack of proper awareness/education. Currently there are about 136,000 taxpayers registered at ARD’s three tax offices. These offices are divided as follows

• Large taxpayers’ office(LTO) • Medium Taxpayers’ office(MTO) • Small Taxpayers’ office.(STO)

Based on the study undertaken it was found out that the taxpayers of Afghanistan in general and that of MTO and LTO in particular are facing tremendous problems potentially being identified as in three areas which are as follows

1. How to fill the return 2. Basic accounting standards 3. Income tax law

Although the revenue of ARD has increased in last years but not that much as it should have been and one thing more that increasing revenue is not the only priority of ARD rather taxpayers satisfaction being one of the important element for sustained economic stability. So lack of taxpayers’ satisfaction is an opportunity as well as threat for ARD and it is the reason that why this project should be implemented. There are many other justifications as well that will be discussed in later sections. Moreover the project cost is also a valid reason for this project because if we do the cost benefit analysis of this project, it is evident that we are going to get more with comparatively less investment.

6: Environmental Analysis: There are various tools for environmental analysis amongst which the PEST and SWOT analysis are the most important once. SWOT analysis has been done related to this project. Each part of this analysis is stated as under. Strength:




There are many strengths for this project based on which this project can be effectively defended and can ensure the success of this project. The major strengths are as under. ARD has proper infrastructural facilities that help to reduce the budget of the project considerably. The top management of ARD is dedicated towards the implementation of such type of project which always is an important element for success of a project in an organization. There are qualified employees who could be used as instructors during the project against a comparatively low incentive which not only decreases the project cost but also become a source of income for some of its qualified employees. Weakness: Normally, those projects are not given that much importance which do not give a direct benefit/revenue. So this is the only weakness which exists for this project. But to overcome effective presentations will be done to various stakeholders so as they can understand the potential benefits of this project. Opportunity: There are various opportunities that exist for this particular project which are as follows: Since the project is designed under the able mentorship of qualified mentors which adds value to the project. There exist a need among the taxpayers as evident and proved through need assessment for this particular project because the education level of people is low enough that require for the implementation of this project for the purpose to effectively fulfill there tax obligation. Since Afghanistan is passing through development stage therefore there are various opportunities for the project to be funded, the only need is that this project needs to be properly presented. Threats: Threats are always there but with varying magnitude but it depend upon the management of the project or an organization to convert the threats into an opportunity. Same is the case for this project, following are some of the threats this project might face. There are some employees in important positions that might use there influence to resist this project because they might consider this project a threat towards there importance and not there illegal source of revenue. As previously stated that there are proper infrastructural facilities that will contribute towards this project. At same time this could be threat as well since there are other training programs arranged for the employees so there might exist some shortage of these facilities.

7: Objectives of the Project: Every action has certain reaction weather the action is done for the purpose of that reaction or not. Since resources are scarce therefore efforts should be taken to use the resources in such a way that results to maximum result or output. The taxpayers’ education program/project has the positive point that this project results to some most important objectives that not only affects the taxpayers but the whole of Afghanistan Revenue Department. These objectives or potential deliverables of the project are as under:

1. Taxpayers satisfaction: The primary objective and potential deliverable of this project is the satisfaction of taxpayers in such a way that they become able to fulfill there tax obligation effectively and that taxpayers are able to understand there duties and responsibilities according to laws and regulations of government of Afghanistan.

2. Increase Revenue: Every government derive revenue from various taxes and non tax activities from there citizens or people living in the physical jurisdictions of that particular country. And it’s the objective of every government to increase these revenues either through increasing tax percentages or tax base which could only be possible in either case if the




taxpayers are satisfied enough so that they can smoothly pay there tax obligation. So it is hoped that the project will results to improvement of taxpayers satisfaction and ultimately increase in revenue.

3. Decreased Corruption: In Afghanistan like many other countries corruption is due to various reasons, one of the most important one is lack of taxpayers understanding of there rights and duties and that’s the point that most of the corrupt employees take advantage of grab bribe from the taxpayers.

8: Project Work Plan Template:

Period YEAR 2010 YEAR 2011 YEAR 2012

Activity code

Activity Description

M 7

M 8

M 9

M 10

M 11

M 12

M 1

M 2

M 3

M 4

M 5

M 5

M 7

M 8

M 9

M 10

M 11

M 12

M 1

M 2

M 3

M 4

M 5

M 5

M 7

M 8

M 9

M 10

M 11

M 12

01 Need Assessment

02 Proposal Development

03 Curriculum Development

04 Supporting Activities

04 Funds Finding

05 Recruitment And Selection

06 Taxpayers Classification And Scheduling

07 Training Conduction

08 Monitoring and Evaluation




9: Project Logical Model:

10: Monitoring and Evaluation: Monitoring and Evaluation is an important activity for every project which ensures that the desired objectives are properly achieved. For this very reason tax payers education project /program has also an effective monitoring and evaluation system for the purpose to ensure that the objectives designed deliverables targeted are achieved. There will be two types of monitoring and evaluation procedures to be used at various intervals. Firstly for the purpose to have continuous feedback from various taxpayers it is designed that at the end of each course a short evaluation forms will be distributed for the purpose to get immediate feedback not to know the effectiveness of the project but also to find if there is any requirement for any potential changes in either the curriculum or the overall program during the project. Secondly there will be a general survey from a representative sample of the targeted taxpayers at the end of this program. The main aim of this evaluation is to find an overall response any potential change in the psyche of the taxpayers. The results of this evaluation will be compared with the results of the need assessment. Thirdly observational tool will also be used through out the project for the purpose to observe the effectiveness or requirement for any potential changes.




Annexure 1: Curriculum for Taxpayers education program The taxpayers’ education program is an educational training capacity building program aimed at educating the targeted taxpayers of Afghanistan Revenue Department. Curriculum is an important element of assignment three (TEP) of UNITAR post reconstruction program. Since the project is related to imparting education regarding the three identified areas which results to many problems for the taxpayers these areas are as follows:

• Filing of Income Tax Return • Basic accounting principals • Income Tax Law

All the three identified areas are aimed to be targeted in the education program. The curriculum is designed with consultation with various legal experts and people who work in operational level at Afghanistan Revenue Department and taking into consideration the data collected during need assessment. Since the course is for a period of one week for each representative of companies therefore efforts are made to design a diverse and logical curriculum that can meet the maximum needs of the taxpayers. For example there are 113 articles of Income tax law and many guides related to taxation, each requiring a long explanation therefore those articles and other material is being added as part of the curriculum that relates most with the taxpayers and there problems which they normally face. Moreover since grabbing each point during the lectures for the representatives is not an easy job therefore printed pamphlets will also be given to them as source of information. Following is the curriculum divided into 10 chapters. Chapter 1: Introduction to ARD and Tax:

i. What is ARD and its importance and history of taxation in Afghanistan ii. Revenue trends for the last 10 years iii. Cross comparison of taxation in Afghanistan and some regional countries iv. Importance of tax accounting

Chapter 2: Income tax Law of Afghanistan:

i. Tax year and payment of taxes ii. Taxable Incomes iii. Different tax entities and there differences

Chapter 3: Types of Taxes:

i. Income Tax ii. For Businesses iii. For individuals iv. Business Receipts tax v. Withholding taxes vi. Custom Taxes

Chapter 4: Tax Exemption and process of Exemption:

i. Tax Exempted Incomes and Contracts ii. Process of Exemption

Chapter 5: Allowable expenses:

i. Theme of allowing expenses




ii. Allowable and non allowable expenses Chapter 6: Appeals and amendments

i. Theme of appeals and amendments and there importance ii. Appeals and amendments with respect to Income tax Law iii. The different stages

Chapter 7: Punishments

i. Various penalties and there nature and implications ii. Concealment of income and its impacts

Chapter 8: Keeping Records

i. Importance of keeping records ii. What to be recorded for tax purpose iii. Law related to keeping records

Chapter 9: Income tax Return and other forms for taxes

i. Importance of ITR ii. Types of ITR iii. Types of ITR filed iv. Other forms and their importance and how to fill them

Chapter 10: Tax accounting

i. Importance of tax accounting for ARD and for the company ii. Explanation of ITR with respect to basic accounting principals.




Annexure 2: S# Description Unit

Cost($) Quantity Months Total

Cost($) Remarks

A: Human Resource 1 Project Manager 1,800 1 24 43,200 2 Project Coordinator 1,200 1 24 28,800 3 Instructors 1,500 4 24 144,000 4 Training Assistants 1,000 3 24 72,000 Sub Total 288,000

B: Equipment 1 Multimedia Projector 1,200 3 24 3,600

2 Printers Big 1,000 1 24 1,000 3 Laptops 1,200 3 24 3,600 4 Desktops with accessories 900 75 24 67,500 5 Photocopier 1,500 1 24 1,500 6 Accessories -‐ -‐ 24 3,000 7 Others -‐ -‐ 24 5,000 Sub Total 85,200

C: Supplies and Consumables 1 Cartridges for Printers 60 12 24 720 1 per month 2 Toners for Photo copier 60 12 24 720 1 per month Sub Total 1,440 D: Furniture and Fixtures 1 Tables 130 75 24 9,750 2 Chairs 50 75 24 3,750 3 Others -‐ -‐ 24 4,000 Sub Total 17,500 E: Miscellaneous 1 Refreshments 2 36000 24 72,000 75 participants six

days a week for 80 weeks

2 Printings 5 600 24 3,000 3 Communication Cost -‐ -‐ 24 5,000 Subtotal 80,000 F: Gross Total 472,140

Contingencies @ 10% 47,214 Grand Total 519,354 Note: budget may be subjected to change as per the requirements of donor




ANNEXURE 3 PROPOSAL FOR TAXPAYERS’ EDUCATION PROGRAM/PROJECT:

Project Title:

Taxpayers Education Program

Reference No:

##

Applicant Organisation:

Afghanistan Revenue Department(ARD), Ministry of Finance

Date of Submission:

Nov 2010.

Funding Requested (AFA & USD):

AFA

$519,354 or Afs 23,370,930

Co-‐financing: (AFA & USD):

Nil

Duration for Funding:

24 months

Applicant details

Name of Contact Person Najeeb Ahmadzai

Telephone/Mobile 0775070936

Fax -‐

Email [email protected]

Postal address Kabul-‐Jalalabad Main Road, Directorate of Revenue and Customs

Brief Description of Role and Activities of Applicant

Head of Special Projects’ Unit of ARD




Executive Summary Summary of project: Taxpayers of the Afghanistan Revenue Department (ARD) of Ministry of Finance are facing problems and challenges due to lack of proper awareness/education. Currently there are about 136,000 taxpayers registered at ARD’s three tax offices. These offices are divided as follows

• Large taxpayers’ office(LTO) • Medium Taxpayers’ office(MTO) • Small Taxpayers’ office.(STO)

Based on the study undertaken it was found out that the taxpayers of Afghanistan in general and that of MTO and LTO in particular are facing tremendous problems potentially being identified as in three areas which are as follows

4. How to fill the return 5. Basic accounting standards 6. Income tax law

Although the revenue of ARD has increased in last years but not that much as it should have been and one thing more that increasing revenue is not the only priority of ARD rather taxpayers satisfaction being one of the important element for sustained economic stability. So lack of taxpayers’ satisfaction is an opportunity as well as threat for ARD and it is the reason that why this project should be implemented. There are many other justifications as well that will be discussed in later sections. Moreover the project cost is also a valid reason for this project because if we do the cost benefit analysis of this project, it is evident that we are going to get more with comparatively less investment.

a. What are the project’s main activities?

TEP involve following activities: 1: Need assessment or base line study 2: Curriculum development 3: Funding for the project 4: Infrastructural Activities 5: Staffing of employees 6: Calling taxpayers 7: Course conduction 8: Monitoring and evaluation being an ongoing process.

b. Which groups are the main project beneficiaries? The project beneficiaries are threefold as follows:

1: Private Sector (MTO and LTO Taxpayers) 2:GoA (MoF-‐ARD) 3:Common men of Afghanistan




c: Output and measurable impact of the Project:

1:Educated taxpayers 2:Decreased corruption 3:Smooth Tax processes 4:Improved Investment environment 5:Increased tax base

d: How will donor funding add value to this project? MoF/ARD is keen to seek funds to implement the project. Donor funding will be the primary financial support for undertaking the taxpayers’ education project in the Kabul’s MTO and LTO.

Work Plan and Methodology

List and describe the objectives of your proposed project, and the intended outcomes.

# Objective Outcomes Timeframe

1 To educate the taxpayers so that they can better understand there rights and duties.

Efficient and effective taxation system. 24 months

Summarise the measurable key milestones of the project, with indicative timeframes in the table below. Please expand the table as required.

# Key Milestones Target Date

1 Recruitment And Selection

1Dec 2010 – 30 Dec 2010




2 Taxpayers Classification And Scheduling

1Dec 2010 – 30 Dec 2010

3 Training Conduction

1 Jan 2011 -‐ 30 December 2012

4 Monitoring and Evaluation

1 Jan 2011 -‐ 30 December 2012

If your project will incorporate a baseline study or impact study, explain how this will be carried out, and when. Base line studies always have core importance for the success of every project for the purpose that it give a transparent way through. The base line study for this project has already being done in form of need assessment which clearly indicates the problems that exist and the suggested solutions for that.

Project’s sustainability: Sustainability is a major element in any sort of reform project. Since the laws and regulations changes with the passage of time and requirement therefore there might be need for such trainings in future as well but not with regular intervals. If any minor changes occur it could be clarified and advertised to taxpayers through using normal advertisement tools.

Anticipated risks associated with the project and the steps to mitigate them:

# Risk Likelihood Impact Steps to Reduce the Risk

High Med Low High Med Low

1 Poorly developed project plan

X X ARD will continuously monitor the project implementation process

2 Resistance to the project by some of the employees

X X Better coordination within LTO, MTO and ARD and support from relevant stakeholders




3 Deterioration of security

X X Since the project is focused in Kabul, there very low likelihood for such risk.

4 Availability of infrastructural facilities

X X There are infrastructural facilities available in ARD but since many other courses are also in progress therefore there might be some hurdles in arranging this course.

Partnerships and Stakeholders

Sole ownership of the Project:

ARD and UNITAR are owners and applicants for the project; however, for the better management of the project implementation both UNITAR group 3 and ARD will work together.

Implementation of the project: Will be implemented by ARD and the Project Team that is UNITAR Group 3

Describe other actors working in the area and past and existing reform efforts in the area, together with:

A: A short assessment of the strengths and weaknesses of these; B: Key points of differentiation with respect to this proposed project (including an explanation of how the project being proposed will not produce overlaps); and C: Brief descriptions of the activities that will be undertaken to ensure coordination among the various stakeholders working in the area.

According to law, ARD is sole source of revenue collection for GoA. Therefore, undertaking the project is the mandate of ARD and there is no other actor to cause any duplication or overlap.




Details of private sector support for and anticipated involvement in the project. Government has the obligation to provide such services to its taxpayers but since anything without a return is considered to be useless even if that is of more importance. Therefore a minimal amount of 1500 Afs will be charged to each company which will result to return of almost $200,000. Project Budget: Description Total Cost($) A: Human Resource 288,000 B: Equipments

85,200

C: Supplies and Consumables 1,440 D: Furniture and Fixtures 17,500 E: Miscellaneous 80,000 F: Gross Total 472,140 Contingencies @ 10% 47,214 Grand Total 519,354

Conflict of Interest and Other Disclosures

Conflicts of interest or potential conflicts of interest

There is no conflict of interest between ARD and any other organisation wether private or govt

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