Kazakhstani legal experts disagree with new tax code concept

As reported earlier, the project of new tax code will be considered and adopted by Kazakhstani parliament until the end of this year. The code project will be considered at the session of the Kazakhstani government on August 26 and will be further directed to the parliament.

Recently, the ministry of economy and budget planning reported the innovations expected to be brought into the new tax code.

According to the new rules, people who have expensive property in the country will have to pay more money for it. The rates for expensive property of private entities will be increased from 0,5 percent to 1 percent. Such rate will concern property which costs over 30 million tenge. Besides that, the new tax code provides introduction of progressive scale of rates for uniform land tax from 0,1 to 0,5 percent, depending on the land area.

As for corporate surtax, the rates are planned to be decreased from 20 to 15 percent. The uniform rate of individual surtax will be kept at the level of 10 percent.

The new tax code will significantly influence manufacturers of domestic alcoholic drinks and tobacco products. The excise rates for these products will be increased by 100 percent within the next 3 years. According to the representatives of Kazakhstani government, next year the rate will be increased by 30 percent, in the year of 2010 the rate will be increased again by 30 percent and in 2011 it will be increased by 40 percent.

Small and medium business will not face any significant changes, the government plans to keep special tax regimes at the base of patent and simplified declaration.

The innovations will concern mineral developers who will face tax loading in the country. According to the new tax code, the royalty payment will be replaced with tax on minerals extraction, which will be calculated at the base of extraction volume and world prices. Along with this, there will be introduced preferential rates for subsurface users developing low profitable, drowned, low debit and developed deposits.

"I order the working group not to stop at the achieved results and to look what we can improve in the code project," said Karim Massimov, the prime minister of Kazakhstan. Along with this he added, that it is impossible to satisfy all the wishes, "but we have an opportunity to finish the project," said Karim Massimov.

However, despite a number of positive innovations, the "Union of entrepreneurs and proprietors protection" declared that the experts and analysts of tax law concluded that the acting tax code is the main break for effective development of Kazakhstani economy. At the same time, the union representatives believe, that the new tax code will not be able to significantly change the situation. "From our point of view, the working group in the concept and project of new tax code offers outdated methods, which do not have any innovations. In reality they have a character of changes and amendments into acting tax code, but not a new tax code, which was ordered by the president of the country," stated the representatives of the "Union of entrepreneurs and proprietors protection" in the message to the head of Kazakhstani government.

As an example, they mention a position on "general declaring", which introduction was postponed till the year of 2015, such action was explained by unavailability of technical base of the tax committee, absence of experience and examples in the world practice. "Such steps will inevitably bring to adoption of new, next and numerous laws on property and money legalization. Property legalization was held in Kazakhstan two times, and it is hardly possible to hope, that the world community will take it as "compelled measure"," stated the union representatives.

The union representatives proposed to urgently introduce general declaring in the country, they believe, that such measure will decrease corruption level by 60 percent. "The declaration will make officials think carefully before taking a bribe, as far as it will make him explain the source of revenues," state the representatives of the "Union of entrepreneurs and proprietors protection".

Besides that, the union representatives offer to introduce principle changes for small business subjects by introducing general tax in the form of standard receipt. Such measure will concern private or legal entities whose revenue is not over 12 million tenge per one year and who have not more than 12 employees. The legal experts offer to establish general rate equal to 4 percent out of total profit per year for small business subjects.

As for tax checks, the union representatives offer to introduce cameral method. "We offer to cancel checks of small and medium business, while presentation of claims to tax bearers should be establish ed on the base of results of strictly regulated measures of cameral control," stated the representatives of the "Union of entrepreneurs and proprietors protection"