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39,330 taxpayers joined the Tax Amnesty for Small and Medium-Sized Business programme
Photo: open source
As of 1 July 2019, 39,330 taxpayers had joined the Tax Amnesty for Small and Medium-Sized Business programme (©Paragraph 2019 / 18.104.22.168), zakon.kz reports citing the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan.
The official term of completion of the tax amnesty for small and medium businesses expires on 31 December 2019. According to the data of the State Revenue Committee, the potential participants are 90,077 taxpayers who had 210.4 billion tenge in arrears as of October 1, 2018, penalties – 122.9 billion tenge and fines of 7.4 billion tenge.
Will everybody be able to benefit from the tax amnesty and to what extent will small and medium businesses actively participate in this action?
The Director of the Audit Department of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan Zhandos Duisembiyev answered all these questions.
- Zhandos Zhumabaevich, how do you assess the results of debt write-offs in the first half of this year? Does this process have a positive effect on the state budget revenues?
- As international experience and the experience of previous domestic programmes prove, the amnesty is an effective alternative to get rid of the burden of tax liabilities. And taxpayers use it. And yet the main goal is not to replenish the budget but to return the business to the legal field, preserve jobs in existing enterprises, and improve the economy in the small and medium-sized businesses.
Since the advantage of this amnesty is the 100% reduction of fines and daily growing penalties, the business community welcomed this initiative, given the significant size of this business segment. The state revenue authorities are ready to help resolve the situation during the amnesty period, i.e. until 31 December 2019.
На 1 июля 2019 года к программе «Налоговая амнистия для малого и среднего бизнеса» присоединилось 39 330 налогоплательщиков посредством погашения основного долга по налогам в сумме 7,6 млрд. тенге. По ним списано пени 2,1 млрд. тенге и штрафов 180,6 млн тенге.
As of 1 July 2019, 39,330 taxpayers joined the Tax Amnesty for Small and Medium-Sized Business programme by paying off the principal tax debt for KZT 7.6 billion. They were written off penalties of KZT 2.1 billion and fines of KZT 180.6 million.
- The media and social networks are discussing the issue of weak dynamics of the tax amnesty. After all, only a little more than 7 billion tenge of the previously announced by the Committee 210 billion tenge was repaid. How do you explain these facts?
- In fact, the amount of repayment by taxpayers was only 3.6% of the total amount of arrears formed as of October 1, 2018. However, it is necessary to be careful and correct to inform the public about the following: each taxpayer has the same right to become a participant in this program.
The time of the amnesty launch corresponds to the global strengthening of the fight against tax evasion. About half of all debts (44.4% or 93.4 billion tenge) fall on VAT. And this type of tax is subject to a high risk of using the so-called "grey" and "carousel" schemes for VAT offset. Indebtedness is most common in the construction industry, wholesale and retail trade and in the provision of services, which account for more than 60% of the debt and are directly or indirectly related to public procurement (contractors, subcontractors, suppliers at all levels, etc.).
Geographically, the significant concentration of debts corresponds to the concentration of tax revenues, namely: Almaty (13.5%), Shymkent (13.4%), and the Karaganda region (13.8%).
If we have previously talked about the benefits and unique opportunities of taxpayers' participation in the amnesty, subject to the repayment of the principal debt, then let's discuss potential problems and steps taken by the Committee to make the amnesty successful.
First of all, the problem is the high level of indebtedness of those who have become liquidated, bankrupt, inactive and others as of the current date. Their number is 18,489 with a total debt of 136.1 billion tenge or 65% of the amount announced as of 1 October 2018.
Second, the amnesty itself does not affect the behaviour of the taxpayer. The decision of the taxpayer to join the program depends on resources and purposeful efforts.
For example, the list of persons potentially subject to the amnesty includes a taxpayer whose arrears amount is about 700 million tenge. The arrears were formed in April 2017. The methods and measures of compulsory recovery have been applied to the taxpayer, which have not led to the repayment. Since April 2017, the company does not conduct any financial and economic activity, does not submit tax reports, does not have any legal address and does not have any assets to repay the debt according to the information of the authorized bodies.
Therefore, this taxpayer claims to amnesty of debts to the budget, but its participation in the program is still doubtful.
This is a well-known global practice, where the taxpayer himself weighs the benefits and costs of tax evasion. Some entrepreneurs remain in the shadows. Therefore, despite the discussed effectiveness of the amnesty, the Committee is left with three responsibilities: explanatory work among taxpayers, tax control and ensuring that taxpayers meet their tax obligations in full. Notification work has been organized, notices have been sent to everyone to take part in the program, and seminars have been held in the first half of the year and are scheduled to take place in the second half of the year in the regions.
- In principle, you have provided all the statistics and arguments. Could you tell us in detail when the amnesty really helped the taxpayers?
- Unlike those who are still passively in the shadows, there are positive examples of how to reboot a business. As I mentioned earlier, about forty thousand taxpayers used the opportunity to write off debts. If we exclude the inactive, bankrupt, it is already more than 50% of debtors.
Fines and penalties were written off and all restrictions and arrests from bank accounts, property, etc. were accordingly removed, i.e. a full-fledged opportunity to continue doing business has appeared.
I will give you one of the examples of the Aktobe region. LLP provides technical services in the mining industry and as of October 1 had outstanding tax debt on corporate income tax of 470 million tenge, including arrears - 138.3 million tenge, penalties exceeded the principal debt by almost 3 times. As a result of participation in the tax amnesty for 138.3 million tenge, the taxpayer was written off a penalty for 331.6 million tenge.
As you understand, the write-off of this amount had a positive impact on the company's corporate portfolio.
According to expert opinions, the participants of the Tax Amnesty for Small and Medium-Sized Business programme have great advantages. Although the methodology has already been developed, the repayment of the principal amount of the debt will lead to the write-off of fines and penalties without the application of the taxpayer. If necessary, if you find the outstanding debt, you can apply to the local government revenue authority, where you will receive the necessary calculations and advice to write off the debt.
At the same time, there are other ways of settlements with the budget, such as installments and deferral of payments, which are not included in the list of tax amnesty for taxpayers.
- Thank you for your interview and detailed analysis of the current tax amnesty situation.
- In conclusion, I would like this year to be marked by cooperation and mutual respect. Our state body is open for working and operative contacts on solving the issues caused by the tax policy. There are still 6 months to come, and I hope that soon there will be a full response from the entrepreneurs, aimed at relieving the accumulated debt burden on penalties and fines.
July 17, 2019, 10:09