VZCZCXRO5079
RR RUEHDBU RUEHPW RUEHSL
DE RUEHBUL #1586/01 1721242
ZNR UUUUU ZZH
R 211242Z JUN 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 9593
INFO RUCNAFG/AFGHANISTAN COLLECTIVE

UNCLAS SECTION 01 OF 02 KABUL 001586 
 
DEPARTMENT FOR SRAP, SCA/FO, SCA/A, EUR/RPM 
STATE PASS TO AID FOR ASIA/SCAA 
USFOR-A FOR POLAD 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PHUM PGOV AF
SUBJECT:  PRT/KUNDUZ - FEYZABAD'S MAYOR DISCUSSES TAX REFORM, CITY 
BUDGETS AND HIS ARREST ON CORRUPTION CHARGES 
 
SUMMARY 
------- 
 
¶1. (SBU) State PRTOff recently discussed city politics with 
embattled Feyzabad Mayor Engineer Momenshah.  Momenshah, a 
construction company owner from northern Darwaz District with prior 
experience in the NGO and development community, was appointed mayor 
in early 2008 under the sponsorship of former Governor Majid.  In 
early 2009, Momenshah was arrested by the Badakhshan Provincial 
Prosecutor, Ahmruddin Yaman, on charges of corruption and collecting 
illegal taxes.  After staying in jail for a week, Momenshah was 
removed from office pending the resolution of his case. Momenshah's 
predicament highlights the difficulties and dangers faced by those 
navigating local Afghan politics. 
 
FIXING THE WORST ROAD IN THE NORTHEAST 
-------------------------------------- 
 
¶2.  (SBU) With years of construction and NGO development work under 
his belt, having worked for the WFP, UNICEF and UNOPS earlier in the 
decade, Engineer Momenshah claims he took over the mayor's office 
with a reformist mindset.  Indeed, anticipating the extra traffic 
expected upon the completion of the Kishim-Feyzabad road, one of 
Momensha's first acts as mayor was to straighten the steep, windy 
road connecting the old and new cities, significantly reducing 
traffic snarls and drive times, though leveling part of the old 
bazaar in the process. Emboldened by this quick and early success, 
the mayor then decided to tackle the tricky issue of municipal tax 
reform. 
 
CITY BUDGET AND REVENUE REFORM 
------------------------------ 
 
¶3. (SBU) Momenshah reports that once in office, he faced crippling 
budget constraints due to outdated and arbitrary systems of city tax 
collection and budgeting.  The city's development and operating 
budgets, in theory allocated by Kabul, did not exist.  Feyzabad's 
entire annual budget instead came from local taxes on livestock, 
wheat, rice and flour sales under regulations and methods dating to 
the reign of Mohammed Zahir Shah.  Other taxes or fees, such as that 
on potable water, simply disappeared into the relevant offices. 
Furthermore, the city budget was spent at the personal discretion of 
both the governor and the mayor.  Using newer tax regulations 
promulgated by Kabul five years ago (1383) but never implemented as 
a guide, Momenshah met with local officials and line departments to 
work out an ambitious and transparent tax collection and budget 
system.  Instead of directly taxing individual vendors at the 
bazaars, taxes would now be collected on imported goods at the city 
gates.  From these checkpoints, tax officials could now examine the 
shipping documents of trucks to determine the type of good being 
imported and its final destination. 
 
¶4.  The new system also broadened the range of goods to be taxed. 
According to Momenshah, the new scheme was approved at an Executive 
Committee meeting in spring 2008 by relevant line departments and 
offices, including the Governor's Office, the Ministry of Finance 
and the Prosecutor's Office.  Tax collection services were then 
auctioned off to a company promising revenues of at least 3.6 
million Afghanis per year.  Finally, Momenshah reworked the city 
budget so that 45 percent of revenues went to the city's operating 
budget and 55 percent to development and construction projects. 
Funding the operating budget was significant, Momenshah says, given 
that so many employees received little or no regular salary.  Armed 
with committee approval and with the support of Governor Majid, the 
new tax collectors started work at the city gates in May 2008. 
 
UNPOPULAR TAXES 
--------------- 
 
¶5. (SBU) From the start, the new tax system was unpopular and met 
with opposition from many corners of Feyzabad.  Fuel, cement and 
steel bar traders in particular protested loudly at being taxed for 
the first time.  Delegations from these local businesses complained 
formally to the Governor, saying the new checkposts and taxes on 
their goods were illegal.  Governor Majid, himself an outsider with 
no firm power base in the province, passed the issue to Independent 
Directorate of Local Governance (IDLG) in Kabul for a formal 
opinion.  After consultation with the Ministry of Finance, IDLG then 
issued a precise listing of the types of goods to be taxed by 
municipalities throughout the country, essentially sanctioning 
Feyzabad's new system.  Local opposition then turned to Provincial 
Prosecutor Ahmruddin Yaman and Mawlawi Abdul Akhmad Nazif, a 
prominent local religious and political figure whom Momenshah had 
replaced as mayor, for help. 
 
OPPOSITION WITH AMMUNITION 
-------------------------- 
 
KABUL 00001586  002 OF 002 
 
 
 
¶6. (SBU) According to Momenshah, Yaman and Nazif had longstanding 
grudges against him.  Momenshah had earlier refused Yaman's request 
to allocate a prime spot in Feyzabad's public park for a new 
prosecutor's office building, while Nazif was still bitter about 
losing his job as mayor.  Now using the tax issue to mobilize 
support, Yaman and Nazif were able to attack Momenshah openly, 
opening a formal investigation into his office.  After months of 
jockeying, Yaman finally arrested Momenshah and held a press 
conference accusing him of corruption and illegal tax collection. 
Governor Majid, under increasing pressure of his own and soon to 
lose his office in the latest shuffle of provincial governorships, 
suspended Momenshah and reappointed Nazif as temporary mayor. 
 
COMMENT 
------- 
 
¶7. (SBU) With charges still pending and his former patron no longer 
in office, Momenshah understands he will not be returning to office, 
but is hopeful that charges will now simply be dropped.  What he 
finds particularly frustrating is that his tax collection reforms 
are still in place, with revenues expected to top 9 million Afghanis 
this year, a threefold increase over previous municipal revenues. 
Momenshah claims that Feyzabad is the first city in Afghanistan to 
actually put the 1383 tax reforms in place.  While it remains to be 
seen if the charges against him are backed by hard evidence, 
Momenshah's case stands as a reminder of the challenges faced by 
other would be reformers. 
 
EIKENBERRY