Kazakhstan Tax Policy Review

28.09.2020

On September 24, the OECD presented the final report of the Kazakhstan Tax Policy Review (hereinafter - the Review) conducted under the Agreement between the Government of Kazakhstan and the OECD.

The meeting was held in format of video conference, which was joined by 25 members: representatives of the Ministry of Finance, National Economy, National Bank, State Revenue Committee, Statistics Committee, Economic Research Institute JSC, Damu Entrepreneurship Development Fund, as well as experts from the International Tax and Investment Center, Asian Development Bank, World Bank, Ernst and Young and the OECD.

It should be noted that the Review was prepared before the outbreak of the Covid-19 pandemic and the resulting economic crisis. The analysis is based upon the tax system as of February 1, 2020.

Sean Kennedy and Bert Brees, experts from the Centre for Tax Policy and Administration of the OECD, demonstrated a deep and comparative assessment of the tax system in Kazakhstan and presented in detail the main results for each type of tax: PIT, CIT, VAT, special tax regimes for SMEs and social contributions.

In general, experts noted that before the Covid–19 crisis, the Government carried out good tax reforms, which showed positive results. However, tax revenues in Kazakhstan remain low, undiversified and volatile by international standards. Despite the growth in tax revenues over the past decade, the share of taxes in Kazakhstan's GDP has declined and remains low compared to the OECD countries.

Tax and non-tax revenues generated by the oil sector are substantial, which finance a significant portion of government spending.

Presentation highlights the need to increase tax revenues to meet the government's revenue and expenditure goals, as well as to reduce the non-oil deficit. The general idea of a non-oil deficit is to disregard oil revenues from the budget to provide a more realistic economic measures

According to OECD experts, in order to create a modern, fair and sustainable tax system in Kazakhstan, it is necessary to increase certain taxes that can potentially generate more income and are less related to natural resources, such as VAT, eliminate inefficient tax benefits through their in-depth analysis, expand the tax base and improve the tax structure. Kazakhstan is also recommended to switch to a progressive PIT system, but not before certain risks and restrictions are eliminated.

Experts from the World Bank, Asian Development Bank, Ernst and Young, and International Tax and Investment Center gave a high rating to the Review. However, Gennady Rau, an expert from the ADB, also noted the lack of attention to tax administration issues in the Review, and Vladimir Fesenko from Ernst and Young made comments on the residence of taxpayers, which were also not considered in the Review.

Full text of the Review can be found on the OECD website: http://www.oecd.org/tax/tax-policy/ and the website of Economic Research Institute JSC.



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