Our Analytics 30 december — 18:50

For those who doubt reality of Ilham Aliyev's tax policy (Our comment)

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BY MAMMAD EFENDIYEV

Azeri Daily has already commented on the new changes in the Tax Code, trying to reveal the details of the new tax benefits that ordinary citizens and entrepreneurs of the country will get in the new year. This question affects the interests of the absolute majority of citizens of the country. Unfortunately, along with the benefits of new tax breaks, certain gossip continues around the reform. And if there is some truth in the words of constructive analysts, then some details that are missing so far cause sarcastic grins from opposition experts. And this is what caused it.

The law on amendments to the Tax Code has already been approved, and it would seem that's the end of the case. But the law without the relevant regulatory documents cannot function. It was this gap that the opponents of the government circles took advantage of: 'the law was approved, but they forgot about the mechanism of execution, as always,' they say. Like, until the end of the year there are only a few days left, and it is not known when this mechanism will still be developed. It is not clear even whom to refer to micro, small, medium and large businesses, so there is nothing to say about benefits. And those people the most irreconcilable with the policies of the current authorities even managed to talk about tax increases. At first glance, there is some reason in some arguments, but even during the parliamentary discussions of tax manoeuvres, officials promised to present these mechanisms soon.

Indeed, it took only a few days, and the Cabinet approved the criteria for micro, small, medium and large businesses.

Micro-business representatives are a new category of entrepreneurs with an annual income of no more than 200 thousand manats and the number of employees no more than 10 people. The criteria for staff size and annual income for the remaining categories compared with the current figures have increased significantly. Thus, a small enterprise is a subject of economic activity, the number of employees of which ranges from 11 to 50 people, and annual income from 200 thousand manats to 3 million manats. Medium-sized businesses include entrepreneurs, whose annual income ranges from 3 million manats to 30 million manats, and the number of employees varies from 51 to 250 people. And, finally, large businesses include business entities with an annual income of more than 30 million manats, and more than 250 employees.

Another thing was clarified: for new companies, the category of business structures will be determined one year after state registration, when the specified criteria are known. Moreover, starting from the new year, micro-business entities will pay income tax and profit tax only after deducting benefits. In addition, the Ministry of Taxes will not require entrepreneurs to pay the entire tax, and then return to them the amount falling under the benefits. And the benefits used in the production of agricultural products, which from 1999 to the present day are estimated at billions of manats, will continue for another five years. Aren't all these benefits?

Yes, the changes in the Tax Code do not imply a tax increase, but a reduction in the tax burden and, at the same time, the creation of conditions that limit the possibility of tax evasion. This, by the way, was recently announced by Deputy Minister of Taxes Sahib Alakbarov.

Sahib Alakbarov

He clearly emphasised that all amendments went through a long preparatory work and in April of this year were presented to the Cabinet of Ministers, discussions were held in the government, as well as in various ministries and committees. Legislative innovations are aimed at creating favourable conditions for the development of entrepreneurship, reducing the size of the shadow economy, improving tax administration, and improving the efficiency of existing and new tax incentives. Even stimulation of non-cash payments is provided for - the more an entrepreneur uses non-cash settlements, the less tax he or she will pay.

But these benefits will not affect the 19 areas of activity subject to licensing. Regardless of the annual turnover, entities engaged in the sale of luxury goods — gold, furs, and other high-value goods — will be taxed on a general basis. Also, the subjects of the insurance market, wholesale and others will not be able to use the simplified tax scheme. In general, the new changes will lead to a certain decrease in tax revenues, but gradually their volume will be compensated by limiting tax evasion and expanding the tax base.

And that's how the Ministry of Taxes justifies this.

In the coming year, it is projected to contribute 7.316 billion manats to the state budget through taxes. Of these, from the non-oil sector - 4.980 billion manats. And in 2018, forecasts for the non-oil sector are 5 billion manats. You see, a slight decrease in tax revenue is expected. If we take into account that entrepreneurs in the non-oil sector with incomes of up to 8,000 manats are now exempt from taxes, the losses will be approximately 320 million manats. The main tax burden will be borne by the oil sector, but in subsequent years taxes in the extraction sector of the non-oil sector will increase. After all, companies that exploit stone quarries, extract gravel, develop other natural resources show the highest level of tax evasion, and now this will be over. This sphere is controlled from space using the satellites of Azərkosmos OJSC. According to space surveys, specialists determine the areas of the quarries, the depth at which the mining is carried out, and ultimately determine the actual volume of production.

In general, it is necessary to emphasise again, amendments to tax legislation, which will come into force on January 1, are aimed at the development of entrepreneurship. They are due to the economic changes and challenges facing the government. When making changes, the opinions and proposals of entrepreneurs, as well as foreign and local experts were taken into account. That is why they do not interfere in backstage discussions.

And as if to spite the critics of the government, literally the day before, studies of a large consulting network of PwC companies in collaboration with the World Bank were published. Here it is clearly noted that Azerbaijan ranked 28th in the Paying Taxes 2019 tax rating. For comparison, we note that Russia is in the 53rd place, Kazakhstan in 56th place, Uzbekistan - in 64th, Armenia - in 82nd, Tajikistan - in the 136th, Kyrgyzstan - in the 150th. In the ranking, which is headed by Hong Kong, 211 countries participate. In the last place is Venezuela.

But a year ago Azerbaijan occupied the 35th place in the ranking. And the rise of seven steps in just a year says something. At the same time, it should be especially noted that our country took 28th place without taking into account the serious reforms in the tax system expected from the new year, aimed at the development of entrepreneurship.

Already on January 1, 2019, new amendments come into force, which provide for new benefits and tax exemptions, as well as the expansion of the tax base, the introduction of new generation cash registers, the improvement of tax administration and other progressive measures. And today we can confidently say that Azerbaijan will occupy a higher position in the next Paying Taxes rating. But even a year or two later, spiteful critics will find a topic for slandering success, no matter how great these successes are...

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