Tax increase may result in additional inflation up to 3%, said Deputy Prime Minister-Minister of National Economy Serik Zhumangarin at the Government’s weekly meeting today Kazinform News Agency reports.
According to him, VAT rate increase and differentiation to 16% will enable to reduce budget dependence on volatile oil revenues, enhance saving function of the National Fund and finance priority projects.
Agricultural producers are exempted from the VAT payment, Zhumangarin says.
He emphasized that farmer households will remain VAT non-payers. Legal entities manufacturing agricultural products will also be exempted from VAT payment.
“All products like potato, tomato, onions, cabbage etc. manufactured in Kazakhstan will become more competitive,” he said.
Healthcare sector is offered to pay 10% VAT.
Zhumangarin explained why differential VAT rates proposed by the Government are 16%, 10%, 0% and a full exemption.
“This is explained by complexity of administration. First of all, for business. Secondly, for tax authorities. When there are a lot of rates, accounting and preparation of declarations become more complicated, and a debit balance is accumulated. To avoid this, we offer 16%, 10%, 0% VAT rate and exemption from it,” he said.
In his words, only 4% of enterprises pay VAT today. Many entrepreneurs split their businesses to avoid taxation. For this reason, the Government offers to reduce VAT payment threshold from 80 million to 15 million tenge.
“In the majority of developed and developing countries, there is either no VAT rate or it is considerably lower. For instance, VAT payment threshold in Canada, South Korea, Scandinavian countries, some Eastern European countries, Russia, Uzbekistan and Kyrgyzstan is much lower than in Kazakhstan,” stressed Zhumangarin.
He said the Government expects growth in annual tax revenues at 4-5 trillion tenge.
“It should be noted that possible inflation effect from tax increase will be temporary and will be exhausted within a year. Additional inflation is expected at 3%,” Zhumangarin stated.
Previously, it was reported that the Kazakh government suggests setting minimum standard VAT rate at 16%.
