ASTANA, Kazakhstan, January 28. Kazakhstan is proposing to reduce the VAT threshold to 15 million tenge (approximately $28,500); currently, 80 percent of small and medium-sized businesses (SMEs) operate within this range, said Deputy Prime Minister and Minister of National Economy Serik Zhumangarin during an expanded government meeting chaired by President Kassym-Jomart Tokayev, Trend reports.
“As you know, a draft of the new tax code is currently under discussion in Parliament. It includes several measures aimed at reducing tax exemptions, increasing taxes on second-tier banks, the gambling industry, luxury goods, and so on. However, these measures are insufficient to address issues of quality economic growth. As has already been reported, we face an inadequate level of development budget,” said Zhumangarin.
He linked this to suboptimal tax revenue generation.
“The volume of consolidated budget tax revenues relative to GDP is
20 percent. For the Republican budget, this figure is 10.8 percent.
In developed countries, this indicator exceeds 40 percent. VAT is
one of the key taxes, accounting for more than 24 percent of total
tax revenues. However, the essence of VAT has been distorted. Why
did this happen? It is linked to past tax reforms. From 1995 to
2009, the VAT rate was reduced from 20 percent to 12 percent, and
the corporate income tax rate from 30 percent to 20 percent. The
goal was commendable; it was expected that lowering rates would
improve the economic climate, especially in terms of taxation and
investment, and increase the number of enterprises and investments
in the country. At the same time, numerous tax exemptions were
granted, and the tax system was significantly liberalized. However,
tax administration was weakened. As a result, collection rates
dropped,” the Deputy Prime Minister stated.
He noted that legal loopholes emerged in legislation, enabling businesses to optimize taxation by fragmenting operations. This disrupted the VAT offset mechanism, effectively turning VAT into a retail tax with a 12 percent rate.
“Today, out of more than 2.3 million registered taxpayers, only 137,700 business entities are VAT payers—just 6 percent of the total. Of these, only 88,000 (4 percent of all taxpayers) actually pay VAT. One reason is the high threshold for VAT registration—78 million tenge (approximately $148,200). Therefore, as a first step, we propose lowering the VAT threshold to 15 million tenge (approximately 28,500 USD). This range currently includes 80 percent of SMEs, so this change will have minimal impact on most SMEs. In OECD countries, the threshold is even lower, and in some leading economies, it is zero. Finally, VAT will become a tax eligible for offset,” Zhumangarin added.
Additionally, today’s expanded government meeting, chaired by President Kassym-Jomart Tokayev, reviewed the results of Kazakhstan’s socio-economic development in 2024 and outlined key priorities for the upcoming period.