In Support of Tax Initiatives

A constructive dialogue means not only criticism but also support for, and agreement with, certain initiatives. The government undoubtedly has such initiatives, and I believe experts should also highlight the right decisions, even when they are unpopular. I have decided to set out which of the proposed tax measures I agree with, one way or another, and why.

I consider the unification of tax benefits for the two exchanges and the introduction of a single 5% tax on dividends to be a sound and justified initiative. First, there should be no regulatory or tax arbitrage between exchanges, since it gives some a competitive advantage over others. Second, the President instructed the government to work out options for merging the exchanges, which has not yet happened, and a merger is possible only if regulation is harmonized. Third, on the stock market, investors earn mainly from the growth in company value rather than from dividends. It is therefore important that capital gains are not taxed, and the draft appears not to tax them. A 5% rate is very reasonable.

The shift to VAT prepayment. The essence is that an invoice can be issued only if the VAT personal account has a positive balance. Companies that receive an invoice and use the input VAT for offset will then be certain that this VAT has already been paid. I proposed a very similar scheme some time ago. It fully resolves the problem of VAT fraud and makes VAT refunds for exporters transparent, which is one of the most important incentives for exporters. There is an unfounded view that this forces companies to prepay and ties up working capital. I do not quite agree, because the problem is easy to solve. Many companies typically issue invoices in the following month or even later. Companies could be given the right to issue invoices for past work at any time once a positive balance appears. Then, for example, in the following month a company would issue its electronic invoice (ESF) at the moment it pays the VAT. In this respect, we simply need to separate the documents used for CIT from those used for VAT.

Lowering the turnover threshold for the retail tax to KZT 500 million and introducing a higher retail tax for the B2B segment. This is an absolutely right initiative, because today large businesses split up their operations and use tax benefits meant for SMEs to avoid paying taxes. I have actually proposed removing the SME benefits in the B2B segment and keeping them only for retail. In the long term, business splitting affects not only budget revenues but also keeps mid-sized companies from growing into large ones, as it is a barrier to the institutionalization of companies.

We must therefore support any right initiatives, so that the right changes pass, the country's budget deficit is addressed and a proper tax system is created.