At the Government session chaired by Prime Minister Olzhas Bektenov presented new amendments to the tax legislation of the country, primeminister.kz reports.
Deputy Prime Minister - Minister of National Economy Serik Zhumangarin noted that VAT is one of the key sources of budget replenishment, accounting for 25% of the total share. Increase and differentiation of VAT rate up to 16% will reduce the dependence of the budget on volatile oil revenues, strengthen the saving function of the National Fund and finance priority state projects.
Serik Zhumangarin added that producers of agricultural products will be exempted from VAT. Including legal entities. Whereas now their payments make up only 30% of the VAT. Thus, all products such as potatoes, tomatoes, onions and cabbage produced in Kazakhstan will be more competitive.
In addition, it is proposed to establish a reduced rate for the health sector - 10%. However, it may affect other sectors of the economy, which will be determined during the discussion with the expert community and business.
Deputy Prime Minister explained that the announced VAT rate of 10% is due to the complexity of administration. First of all, for business. Secondly, for the tax authorities.
When there are many rates - accounting becomes more complicated, declarations are more complicated, debit balance accumulates. To avoid this, we propose 16%, 10% and exemption," Serik Zhumangarin said.
He added that today only 4% of businesses pay VAT. Many companies artificially split the business to avoid taxation.
This undermines the tax system and prevents normal offsetting of VAT. Therefore, it is proposed to reduce the threshold for registration from 80 million tenge to 15 million tenge. Conditions are created where the cost of the costs of splitting will exceed the benefits of splitting. This will create a level playing field for businesses and prevent evasion schemes. In this matter we are guided by international experience. In most developed and developing economies, the VAT threshold is either much lower or is absent at all," Deputy Prime Minister added.
The experience of Canada, South Korea, Scandinavian countries, Eastern European countries and the nearest neighbours, such as Russia, Uzbekistan, Kyrgyzstan, where the thresholds are lower than in Kazakhstan, was presented as an example.
In addition, it is proposed to revise the retail tax regime:
- The income limit under the proposed regime remains at 600,000 monthly wages that is 2,359 million tenge per year;
- Limitations on the number of employees are removed;
- FOT is deducted if sales income exceeds 100 million tenge per year; 100 million tenge to incentivise wage whitewashing;
- We keep the rate at 4% (with the possibility of a 50% reduction by maslikhats);
- And the key condition is to reduce the types of activities and realisation only in the B2C segment.
The proposed changes will allow for an increase in tax revenues of 4-5 trillion tenge annually. These funds will help reduce dependence on the National Fund, reduce the level of public debt, direct additional resources to the development of infrastructure, agribusiness, manufacturing and defence.
It is important to note that the possible inflationary effect of the tax increase will be short-term and will be exhausted within a year. Additional inflation is expected at the rate of 2.5 - 3," Serik Zhumangarin noted.
In addition, Deputy Prime Minister emphasised that the work on reforming the tax system of Kazakhstan is conducted openly and with the participation of experts. On the instructions of the Head of State, from today will start the work of six working groups, which will discuss the initiatives of the Government with business communities in the regions. The final decision on the issues of differentiated rates and special tax regimes, as well as the threshold of VAT registration is planned to be made after all discussions and collection of proposals.
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