Prime Minister of the Republic of Kazakhstan Olzhas Bektenov held a working meeting with Deputy Prime Minister - Minister of National Economy Serik Zhumangarin and Minister of Finance Madi Takiyev. The issues of fiscal reform and strengthening control over tax revenues were considered, primeminister.kz reports.
Finance Minister Madi Takiev reported that the analysis established the facts of use of special tax regimes (STR), introduced earlier to support and develop small businesses in the period of its formation, as legal schemes to optimise tax liabilities by unscrupulous taxpayers.
Today there are 2.3 million registered taxpayers in Kazakhstan. Of these, only 8% or 137 thousand are VAT payers. In general, of the total number of entities, 81% operate in a special tax regime under the simplified declaration, with 85% of them indicating income up to 15 million tenge.
We have analysed mutual settlements of entities applying special tax regimes with companies operating under the generally established regime. The analysis showed the following: mutual settlements between such regimes have grown 2 times over the last year - from 5 to 10 trillion tenge. At the same time, out of the total turnover of 16 trillion tenge under special tax regimes, mutual settlements with the generally established regime account for 10 trillion tenge. That is, while earning hundreds of billions of tenge, taxpayers pay paltry taxes," Madi Takiyev said and voiced a number of splitting schemes used by businesses.
To optimise taxes and dilute profits, companies follow the principle of increasing documentary costs. One company buys goods and resells them at cost price to another legal entity operating in a simplified regime. As a result, the first company shows a loss, while the second company avoids paying VAT by taking advantage of favourable conditions.
In addition, a method of splitting a business into several legal entities is used. For example, in one establishment a bar, kitchen and karaoke are registered as separate companies, or each floor of the hotel belongs to different sole proprietorships. When the income of one of them reaches the threshold of 78 million tenge, the activity is terminated, and another legal entity replaces it, which avoids paying VAT.
In order to reduce the burden on the payroll, the employees of the enterprise are taken out of the workforce, registered as individual entrepreneurs and provide services to the former employer not as employees, but as individuals. Accordingly, tax payments to the labour remuneration fund are reduced, social responsibility is removed from the employer, and further it is borne by the entrepreneur," Madi Takiev reported.
In this regard, in order to improve tax administration of the Ministry of Finance of the Republic of Kazakhstan proposed a number of measures to combat fragmentation:
- - introduce a legislative criterion of business fragmentation;
- - introduction of the principle of predominance of essence over the form of tax disputes;
- - introduction of methods of control and proof of such facts;
- - limitation of types of activities for sole proprietorships.
It is evident from the information of the Minister of Finance that unscrupulous entrepreneurs, applying various schemes to optimise the tax burden, behave inappropriately. With billion-dollar turnovers they pay to the budget amounts that absolutely do not correspond to their profits. We have a full list of such large companies. There are large well-known construction companies, such as BI Group, BAZIS and many others. Well-known and popular restaurants, fitness clubs and various companies operating in other sectors of the economy.
Taking this opportunity, I would now like to address the owners and managers of large companies that apply various schemes to optimise their tax burden. Today-tomorrow your companies will receive notices from the tax authorities about the need to pay additional amounts of taxes.
I ask everyone to submit additional tax declarations to the tax authorities within two weeks and pay fair amounts of taxes.
If these actions are not taken, the state reserves the right to use all resources available to the state, including fiscal and law enforcement.
The conversation will be tough, but we are ready for dialogue, if business is ready to behave fairly towards the state," Olzhas Bektenov stressed.
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