On February 27, a discussion was held in the Mazhilis regarding a new package of amendments to the Tax Code project. Participants in the round table included representatives from the Ministry of Finance, Labor and Social Protection, Health, Tourism and Sports, as well as other ministries, the Institute of Economic Research, the National Bank, the Agency for Regulation of Financial Markets, the NPP "Atameken," and other organizations, alongside economists.
As previously reported, the new package of amendments included the following mechanisms:
- a standard VAT rate of 16%;
- full VAT exemption for the agricultural sector;
- an intermediate rate of 10% for healthcare;
- reduction of the turnover threshold for VAT registration from 80 million tenge to 15 million tenge.
The draft Tax Code also proposes to exempt mass media from VAT. Additionally, as reported by the press service of the Ministry of National Economy, a review of the simplified declaration regime and retail tax is suggested. While maintaining the income limit for the proposed simplified declaration regime at 600,000 MRP (2,359 million tenge) and a rate of 4% with the possibility of a 50% reduction by local councils, the following changes are proposed:
- a reduction in the types of activities and implementation only in the B2C segment;
- removal of restrictions on the number of employees;
- deduction of the payroll fund if revenue from sales exceeds 100 million tenge per year.
— We expect that, considering the measures being adopted in the draft Tax Code, tax revenues will increase by 4-5 trillion tenge annually. It is important to note that any potential inflationary effect from tax increases will be short-term and will dissipate within a year, — stated Deputy Minister of Economy Azamat Amrin. — The main goals of the budgetary and tax reform are to address three key challenges: economic issues, budget deficits, and strengthening tax morale.
According to Kazinform, economist Almas Chukin also spoke at the Mazhilis working group meeting. He stated, as reported by the agency, that delaying tax reform is not an option.
— Before treating the liver, one must assess the overall diagnosis of the body. We are gathered here because it is evident that our patient is ill. For the last five years, there has been a critical divergence between expenses and revenues. Currently, we are relying on painkillers from the National Fund. Instead of treating the issue, we are merely alleviating the pain by taking free money from future generations, — metaphorically described the situation Almas Chukin.
The expert noted that he supports proposals to increase the VAT rate, as he believes that in just five years Kazakhstan will “face catastrophe according to all forecasts.”
— We will experience a complete collapse of the social and financial systems, therefore, we need to make corrections now; the balance between expenses and revenues cannot differ by 10 trillion. The growth of public debt continues alongside a persistent high deficit. So far, we have not managed to double GDP, but we have doubled our debt in three years. Moreover, every three years, we are doubling the external and state debt. This issue must be addressed, — added the expert.
At the same time, Mazhilis deputy Nikita Shatalov does not share the views of those advocating for an increase in VAT. He believes that the proposals sound “not convincing at all.”
“Firstly, there is only a mention of the model on which the calculations were based, and it contains only those parameters needed by the government to fill the ‘development budget’. There is not a single alternative scenario: for instance, reducing the threshold, the previous VAT rate, and tightening administration. Or a gradual increase in the tax rate. The Ministry of Economy claims that these scenarios do not help resolve the budget crisis. But why do Parliament and experts not see these models? The space for discussion lies in whether the current scenario will be adopted,” — writes Nikita Shatalov on his Telegram channel.
Secondly, Shatalov believes that currently “the cause of the budget deficit is practically attributed to low taxes,” while there are no systemic measures in the country to combat business fragmentation and more.
“When there is talk in Parliament about reducing expenses, the only response is, ‘applications for 32 trillion have been submitted, but we approved only 25 trillion.’ This is presented as optimization. Yet we see problems, such as a lack of funding for basic infrastructure. Why, in these cases, do akims build stadiums and swimming pools — that is a big question. Perhaps we should address priority issues so that industries receive energy, and there is no sulfur snow over cities? — questions Shatalov. — The scale of reductions is clearly downplayed. There is room for improvement. However, there is also room for exceptions: Albert Pavlovich Rau spoke about the gray import of cigarettes, phones, and gaps in administration.”
Thirdly, as the deputy claims, there is the inflation factor.
“Economist Chukin somehow claims that it will not increase, although the Ministry of Economy acknowledges it (growth around 3%). But in reality, it will be higher: expenditures from the development budget on the economy will also contribute to inflation, as will the indexing of social payments. Agents' expectations have already factored in inflation growth. Additionally, there may be another factor: expenditures on equipment will put pressure on the exchange rate of the tenge against the dollar due to increased demand for currency, and this will also contribute to price increases. Every percentage of inflation affects the quality of life of our citizens. We need to find a balance among various interests,” — suggests the deputy.
Shatalov also believes that the previous model of economic management in the government is not changing. “Simply raising taxes for additional injections into development will sooner or later return us to the same situation, where it will be necessary to take money from the population and businesses again. And just eliminating the social insurance fund and canceling advance payments, as Chukin suggests, will not resolve this,” — concluded the deputy.