Chapter 1. Concept, types and purposes of fiscal policy

Direct taxes are installed directly on the income or property.(property tax, land tax, income tax, etc.).

Indirect taxes are taxes on goods and services, salaried priced product or included in the tariff. The indirect tax administration includes VAT, excise duties, customs duties and so on the owner of the goods or services with them gets tax amounts that list the State. In this case, the relationship between the payer and the State indirectly, through taxation.

Starting from January, 1 2009, in Kazakhstan a complex of changes and updates to the Tax Code inures stage by stage to the taxation system of the Republic, and many of these changes are based on principles of taxation system of the European Union. That is, as the Prime Minister Karim Masimov has told: «At those points which we found difficult and didn't know exactly how to act, we've taken the Tax Code of EU as a basic principle of construction». As he said, the taxation of the branches which are not connected with raw sector should be decreased and the corporate tax rate should be decreased too. However a tax to mining operations has appeared. Also in future it is planning to make all citizens declare their incomes, but for the present moment only administrative personnel have to do it. Also new Tax Code was planned with the purpose to affect to eradication of corruption and to make tax system more convenient and less burdensome for conscientious tax-payers.

One of the basic moments of new edition of the Code is the complete cancelling of tax privileges on the certain kinds of activity. These steps should be directed on restoration of principles of unity of tax system, equality of tax-payers at the tax law and justice of their taxation.

«It is necessary to bring tax system into accordance with problems of a new stage of development of Kazakhstan. Present Tax Code has played a positive role in economic growth, however at the moment its potential is practically exhausted», - from the message of the president of Kazakhstan Nursultan Nazarbaev which was declared to the parliament in August, 2008. If the previous code could be named the code of stabilization of the Kazakhstan economy, the new Code which is developed by the government, can be named as "the code of development". While its creation experts of the Ministry of Economics and Budget Planning of the Republic of Kazakhstan wanted to cover few problems.

[Report on new Tax Code discussion (2008), “Political Parties News”, http://qwas.ru/kazakhstan/adilet/id_115671/ ]

First of all it was a question of necessity to order existing and very complicated system of granting of tax privileges to the separate enterprises and businessmen. For that moment, according to the president of Kazakhstan, there were more than one hundred similar preferences and their quantity constantly grew. And at some stage legislators have understood, that such privileges do not stimulate development of Kazakhstan economy any more, but on the contrary, generate unequal competitive environments and conduct the growth of corruption.

The second problem consisted in necessity to make tax system more convenient for conscientious tax-payers and also less burdensome for them. As the president thought, it should lead to reduction of "shadow sector" share in economy and creation of such conditions for business at which legal business would be more attractive.

And the third goal which the government of Kazakhstan wanted to achieve is to create tax stimulus for diversification of national economy and going away from dependence of its export on the world prices for energy carriers. However, all that have been said above represent only strategic purposes of the new Tax Code. But there is also a variety of tactical perspectives. The government of Kazakhstan has tried to make the new Tax Code the standard act of direct action as much as possible. For this purpose all previously accepted during last 5 years standard acts were included to new Tax Code. They tried to make an attempt as much as possible exclude the opportunity of ambiguous interpretation of separate articles of the document. But whether they succeeded or not would be clear only after coming of the standard act into the effect. But in any case, as experts say, an edition of articles of the new Code is much more precise and clear.

Now let's take a detailed view on the changes of tax rates. The new Tax Code of Kazakhstan collects 13 types of taxes. Among them: Corporate Income Tax, Individual Income Tax, the value-added tax, Social tax, Land-tax, the tax to property and others. It is interesting that in CIS countries which use a flat scale of the Income tax for natural persons, there is still exists a necessity of diversification of this tax depending on a level of the income received by the citizen, and Kazakhstan with coming into effect of amendments on January, 1st, 2009 already uses such system. Moreover, the government of republic has defined that the rate of Individual Income tax which now is 10% would decrease in future. Also the taxation of dividends which are received by shareholders of the various companies is decreased. Since 2009 the dividend rate is 5% of income which go to the budget. Rates of taxes in Kazakhstan are considerably lower than the similar rates of neighboring states and the CIS. For example, the Corporate Income tax does not exceed 20%, and the Social tax is collected at the rate of 11%. But the most interesting has happened to the value added tax. After acceptance of the new Tax Code the rate of the VAT is one of the lowest in the world and constitutes 12% for January, 1st, 2009, remains constant in 2010 and will possibly continue the decreasing while next years.

[New Tax Code presentation is on… (2008), “Gazeta KZ” internet site, http://articles.gazeta.kz/art.asp?aid=112481 ] 

The government of Prime Minister Karim Masimov in this question appears to be resolute and ready to stimulate internal development of economy, even despite of possible losses of the state budget. But nevertheless complexity of charge and administration makes VAT a serious brake of economic development, because in some cases VAT is levied several times, for example in cases of intermediary. The government is going to solve this problem by using in the new Tax Code such concept, as "debtor balance". According to the document it will be considered the positive difference between the VAT which is paid to suppliers, and the VAT charged to the buyers». This debtor balance would be compensated from the state budget. However the complexity of this system forces the government to apply this position of the new Tax Code stage by stage. And final transition to it is expected not earlier than January, 1st, 2012.

[New Tax Code is based on European taxation system (2010), “Taxpayers Association of Kazakhstan”, http://www.taxpayers.kz/content/news/index.php?news=12188]

As experts say, the decrease of tax loading on business which occurred in Kazakhstan after coming into effect of the new Tax Code is a quite realized step of a management of our country. As President Nursultan Nazarbaev has told: «The Tax Code should provide decrease of the common tax loading for the non-raw sectors of economy, especially for small and average businesses». But there is another important message of the President that the new Code should become the law of the direct action protected from its free interpretation by tax services and to combine quality of administration and interests of tax-payers.

However, the decreasing of tax rates is already fact that came true, but on the other hand the situation with an ambiguity of interpretation of positions of the Tax Code is still difficult. But it is not because authors have ignored the instructions of the President, that is because only time and law-enforcement practice will show real effect of the changes. But today such fact attracts an attention that in the new Tax Code a clear list of requirements for the tax reporting is established. Also new Code excluded the duty of the tax-payer to give the information which tax organs can independently receive from other offices of state. More of that, the frequency of the tax reporting is reduced.

Also there is a plan to integrate an automatic system of reckoning excessively paid sums of taxes, fines, penalties without the preliminary inquiry of the tax-payer.

Also the special commission performs a permanent work with representatives of business for the subsequent elimination of administrative barriers in economy of the Republic. All this actions should lead to that the new Tax Code of Kazakhstan will correspond to principles of definiteness, validity, publicity and unity.

Tax incomes in the state budget in 2009 was 2.4 mln.tg, in 2010 – 3 mln.tg, and in 2011 tax incomes increased to almost 5 mln.tg.