THE MINISTRY OF NATIONAL ECONOMY ANSWERED BUSINESS QUESTIONS ON INCREASING THE VAT RATE
In Astana, a discussion took place on the issue of increasing the VAT rate with the participation of Minister of National Economy Alibek Kuantyrov, Chairman of the Presidium of the Atameken National Chamber of Entrepreneurs Raimbek Batalov, representatives of government agencies and business.
Despite the fact that the increase is envisaged in 2025 with the entry into force of the new Tax Code, entrepreneurs are already concerned. Representatives of the ministry listened to entrepreneurs from various sectors of the economy and provided clarification on issues that interested them.
“We would like to see more arguments and analysis provided. It is not always enough, not enough to understand in detail why you are proposing to raise VAT this way and not another. According to our preliminary calculations, an increase in the VAT rate will lead not only to inflation, but also to a decrease in the rate of GDP growth in real terms by 1% per year, which jeopardizes the successful implementation of the order of the Head of State to double the volume of the national economy. We would like more justification. Moreover, the lion’s share of business is against increasing the VAT rate,” said Raimbek Batalov, Chairman of the Presidium of the Atameken National Chamber of Entrepreneurs, during a round table discussing the VAT rate.
Maxim Baryshev, entrepreneur, founder of Uchet.kz, gave the example of taxation in neighboring countries. According to him, in Uzbekistan the VAT rate is 12%, in China – 13%, in Kyrgyzstan – 12%, in South Korea – 10%, in the UAE and Canada VAT – 5%.
Vice Minister of National Economy Azamat Amrin noted that when developing proposals for the new tax code, several options for establishing the VAT rate were considered, including its differentiation. However, all of them did not meet the fiscal function – the formation of financial resources of the state.
“First of all, the fiscal function is an additional 2.4 trillion tenge instead of the targeted transfer that we now take from the National Fund annually, about 2 trillion tenge. We won’t take him now. Government spending is growing. Every year we spend 3.5 trillion just on the budget sector – this is all aid: the Collective Security Treaty, the economy of simple things, agriculture. Second point, VAT is not your tax. This is not your tax burden. This is an indirect tax; it does not appear in your tax burden ratio. We don’t touch the business at all – it’s only the end consumer,” Amrin said.
He also noted that this is the position of the Ministry of National Economy of the Republic of Kazakhstan; it is too early to call it the position of the Government.
The entrepreneurs were not satisfied with the vice minister’s answer. In particular, the chairman of the board of the Union of Independent Business of Kazakhstan, Berik Zairov, believes that an increase in the VAT rate will, first of all, hit honest businesses.
“Entrepreneurs cannot find goods with documents; a lot of goods enter the country either with an undervaluation or smuggling. We already have a reserve from where to take VAT. If now all this product is brought out “white”, then the budget will already be replenished. I think we need to start with this, and not with increasing the burden on bona fide businesses,” Zairov noted.
Meanwhile, Erkanat Makanov, deputy chairman of the board of the Union of Mechanical Engineers of Kazakhstan, said that the increase in the VAT rate is very critical for the engineering industry.
“Firstly, we are import dependent. Yes, this is an indirect tax, it is not a business tax. But this is a withdrawal of working capital from our business. Unfortunately, mechanical engineering today “loses” about 50-60% on materials and components. We import them. And we pay VAT immediately. Secondly, these are labor collectives. The factories employ a large number of people, which does not generate VAT credit. Therefore, this increase is very important and serious,” he added.
Raimbek Batalov noted that the issue of increasing VAT requires a careful approach with in-depth analysis, including by industry. Alibek Kuantyrov noted that he would take into account the arguments of business and announced his readiness, together with the National Chamber, to conduct an appropriate analysis within the framework of the working group to develop a new Tax Code.
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%.
The ministry believes that the proposed rate increase will lead to additional budget revenues and will also increase the competitiveness of domestic goods compared to goods imported from neighboring countries. This rate is expected to apply from 2025.