HOW WILL AN INCREASE IN THE VAT RATE INFLUENCE THE MANUFACTURING INDUSTRY
Domestic producers spoke out against increasing the VAT rate from 12 to 16%. They are confident that an increase in the VAT rate will have a negative impact on the manufacturing industry in Kazakhstan and will make it less attractive for investment compared to other Central Asian countries.
“If VAT goes up now, it will definitely be a reduction in production. It is still unknown what will happen to currency risks by 2025, and what inflation there will be. Now we need to direct our efforts specifically to the development of the domestic market, so that our domestic service providers and enterprises carrying out work receive their guaranteed volumes to the domestic market. We were able to do all this and eventually pay both VAT and CIT, but under the current legislation,” said Takhmina Nagumanova, chairman of the Manufacturing Industry Committee.
During the Committee meeting, entrepreneurs spoke about the need to develop protective measures to maintain the current position of the manufacturing industry.
“Today the manufacturing industry accounts for only 13% of GDP, and we will not reverse this situation until we make significantly more attractive conditions. Therefore, I propose to develop a single consolidated position of the industry on the issue of increasing VAT. Our proposal is to reset the VAT rate for small and medium-sized businesses in the manufacturing industry or make it 8%. This will provide some advantage, including as an investment attractiveness,” said Asel Dangilova, executive director of the Union of Manufacturing Industry.
Entrepreneurs also voiced their proposals regarding the establishment of a separate tax regime for the manufacturing industry, the inclusion of OKEDs of the manufacturing industry in the list of activities subject to retail tax, and the calculation of VAT using the “offset method.”
Meanwhile, the chairman of the Manufacturing Industry Committee, Takhmina Nagumanova, noted that all proposals from entrepreneurs have been heard and will be worked out with the Ministry of National Economy.
Let us remind you that as part of the development of the draft new Tax Code, the Ministry of National Economy proposes to raise the VAT rate from 12% to 16%.
Business, represented by the National Chamber of Entrepreneurs, opposes it and demands a more detailed analysis. The energy sector of Kazakhstan has already expressed its position. According to them, an increase in VAT will entail an increase in electricity tariffs.