Understanding the Impact of Kazakhstan’s Tax Reforms on Businesses and Investments
Mazhilis, the lower chamber of the Kazakh Parliament, has approved the draft Tax Code in the first reading on April 9. The government considers this tax reform as a step towards making the system clearer, more predictable, and fairer. However, there are questions arising about who exactly this reform will be fairer for.
The new Tax Code, which has been in the works since September, aims to replace the current one adopted in 2017. Some key highlights of the proposed changes include a 16% value-added tax (VAT), with exemptions for socially significant food products, book publishing, and archaeological activities. Businesses will need to register for VAT once they earn 40 million tenge (US$76,456) per year, lower than the previously suggested 75 million tenge (US$143,356).
Additionally, the tax reform introduces a progressive personal income tax system, with a higher rate of 15% for individuals earning more than 8,500 monthly calculation indices annually. The government officials emphasize that the tax reform targets unscrupulous taxpayers who hide their income and aims to strengthen the fairness of taxation, with the rich expected to pay more.
The new Tax Code also streamlines tax incentives by eliminating 128 out of the current 453 tax benefits, worth an estimated 1.3 trillion tenge (US$2.5 billion). Special tax regimes will be reduced from seven to three, including regimes for the self-employed, simplified declaration, and peasant and farming households.
While the government portrays the reform as a simplification of the tax system, some experts express concerns about unintended consequences on businesses. There are fears that certain businesses may lose access to tax deductions and be forced into a general tax regime, increasing their tax burden. The public and business circles have reacted negatively to the uncertainty surrounding the reform.
However, some experts like Dana Tokmurzina, CEO at Fortune Partners, believe that the tax reform aims to create a more balanced tax burden and a fairer and sustainable tax system. They stress the importance of effective tax administration and call for better tools for tax oversight to ensure accurate and efficient tax collection.
As the bill awaits its second reading in the Mazhilis, the business community is hopeful that the government and deputies will address their concerns and ensure a smooth transition under the new Tax Code.
