A new UN report says the Taliban raised $400 million last year through taxes, donations, and extorting money from enterprises and aid projects in Afghanistan.
According to the report released this week by UN sanctions experts to the Security Council, about $275 million of that money reached Taliban leadership and the rest was spent or misappropriated at the local level.
The estimates cover the financial year ended in March 2012.
The UN report says local taxes imposed by the Taliban include a 10 percent tax on harvest – the main source of income -- and a 2.5 percent tax on wealth.
Services such as water and electricity supplies are also taxed.
"In some areas they collect a 10 percent tax from local shopkeepers and other small businesses," the report says, adding that the militia acts much like a local administration.
The UN experts say donations are another "major" source of funding which also go to militia leaders.
Afghanistan has long been the world's leading supplier of opium.
According to Afghan estimates, the Islamist group raised some $100 million in 2011-2012 from the opium poppy industry -- a relatively small amout considering that the annual value of the drug crop is estimated at up to $4 billion.
The report says this source of revenue provides enough to finance much of the insurgency in the main poppy growing provinces of Helmand, Kandahar, and Oruzgan.
However, “the money raised from the drug trade is insufficient to meet the cost of insurgent activity elsewhere," it says.
The UN report says the Taliban has also taken hundreds of millions of dollars from the billions pumped into Afghanistan for development projects.
The report reads: "Estimates of Taliban income from contracts funded by the United States and other overseas donors range from 10 percent to 20 percent of the total, usually by the Taliban agreeing protection money with the contractor or demanding a cut."
The report quotes estimates by the NATO-led International Security Assistance Force (ISAF) that the Taliban raised $360 million over three years from a $2.16 billion contract awarded to an Afghan trucking company by the U.S. military.
"This example shows how the Taliban are able to raise money from an Afghan economy distorted by and unable to absorb the huge amounts of money that have flowed into the country since 2001,” the report says.
The UN experts say the ISAF estimates that up to $155 million of the Taliban's income was spent mounting attacks in 2011, while the rest maintained the insurgency.
"Since 2006 the Taliban have managed to finance an ever-increasing number of attacks, reflecting a year-on-year increase in income," the UN report says.
Based on reporting by Reuters and AFP