Azerbaijani Deputy Taxes Minister Ilkin Valiyev said that Income tax and value added tax (VAT) rates for small and medium-sized enterprises engaged in production will be reduced in the country.
He made the remarks at a press conference dedicated to execution of the Azerbaijani president’s order, dated August 4, 2016, 'On improvement of tax administration and approval of directions of reforms in taxation in 2016'.
Valiyev noted that in this context, it is planned to amend Azerbaijan’s legislation and simplify tax administration.
“Moreover, one of our main goals is to reduce tax burden. Currently, it is 39.8%. This figure is less than in other countries of the Organization for Economic Cooperation and Development (OECD), but slightly higher than in the countries of the region. Thus, we plan to optimize and somehow reduce the tax burden,” Trend cited the minister as saying.
Currently, Azerbaijan applies a single VAT rate of 18% and the rate of the income tax is 20%.
Ex-deputy economic minister of Azerbaijan Oktay Akhverdiyev, speaking with a correspondent of Vestnik Kavkaza, said that the differentiation of direct and indirect taxes is traditional impetus for the business and entrepreneurship development . However, the Azerbaijani government has not yet announced any specific numbers and interest rates, so it is difficult to estimate future changes, he added.
At the same time, the economist noted that the government's policy in the sphere of socio-economic development shows that the non-oil sector will be a priority for the reduction of tax rates. "First of all, it is transport. This strategic choice is confirmed by the recent meeting of the presidents of Russia, Azerbaijan and Iran in Baku. We also should not forget that raw materials do not last forever. The introduction of equal tariffs for the transit of Russian and Ukrainian cargo through Azerbaijan points to the need of the strategic development of the transport industry".
According to Akhverdiyev, at the time of the global economic crisis, these changes to the tax laws are necessary.
Speaking about the results, the economist noted that "as a rule, large economic projects have a geopolitical aspect in addition to their expediency." "Normal relations with neighbors are always a guarantee that everything will be alright in the country," Oktay Akhverdiyev stressed.
Financial expert Farkhad Amirbekov, said that supporting producers, as well as small and medium businesses through the tax mechanism is a logical step.
Speaking about the relevance of the time chosen for tax reform, the expert drew attention to its connection with the state budget.
"According to the relevant legislation, in August and September there will be hearings in the government and the ministries on the budget for the next year, after which the agreed draft will be sent to the presidential administration and then to the parliament. Therefore, all tax changes should already be taken into account when preparing the budget," the expert said.
Considering the key areas of the tax reform, Amirbekov noted that the consumer model is also being actively developed in Azerbaijan together with the oil economy model.
"If one looks at the structure of the loan portfolio of the banking system, one will see that 38% of loans issued by banks were consumer loans. While industry received 2.1% of loans, construction and real estate - 14.5%, transport and communication - 7%, and the trade - 13.7%. Therefore, emphasis should be placed on the production of goods and services," the expert explained, adding that there is a need to mitigate business credit conditions.
Speaking about the results of the tax reform, the economist noted that along with the change of the tax legislation it is necessary to carry out a package of measures to stimulate the country's production of goods and services. "Firstly, you need to improve the banking system. Secondly, it is necessary to capitalize the banks and to change priorities in lending. At the same time, banks should find the source of 'long money'. Thirdly, the manat should be turned into an investment resource for economic growth," Farkhad Amirbekov stressed.
