Sales Tax May Cause A Backlash Among Businessmen

The replacement of the value added tax with the sales charges can cause new problems for Kazakhstani businessmen, mainly for small business entities. This is an opinion of a counsel of GRATA Law Firm - Yerkin Sagiyev, as reported by LS.

The expert explains: "In Kazakhstan, VAT is paid mainly by medium and large business entities. The introduction of the sales tax (ST) involves payments from small business entities as well."

"There will be great difficulties. Since early 2000, a simplified tax regime for them involves the rate redustion from 13% to 3%. Such a change was made in the budget-friendly period and reasoned by stimulation of business activities," reminded Mr Sagiyev.

The counsel believes that the additions to the existing rate can cause a strong negative reaction from small business entities.

"Alternatively, the Ministry of Finance may try to exclude from the ST payers those taxpayers, which enjoy a simplified regimes. However, such a step will have a stronger impact on the decrease in collection of the new tax," said the lawyer.

Mr Sagiyev also explained the difference between VAT and ST. According to the expert, they play the same role - taxation of consumption expenditure, however the procedure is different.

He says that VAT is collected in parts from all enterprises, which engage in the production and sale of goods or services. While ST is charged in full at the stage of retail sales.

"VAT in Kazakhstan is paid by the majority of taxpayers. Many of them are large importers, manufacturers and wholesale distributors. It is hard for them to work in the sidelines. Even if the retail sector still remains uncontrolled by the tax authorities, part of the funds will in any case collected. This is a serious argument in favour of VAT. As late as 2014, over 70% of VAT was collected at the stage of goods import," said Mr Sagiyev.

The firm's counsel believes that in some cases, VAT existing in Kazakhstan cannot operate without refund from the budget. This position, according to the expert, is a serious vulnerability, which has been for many years used for unauthorised withdrawal of money from the treasury.

At the same time, the lawyer explained that ST has mirrored features. This kind of tax does not provide for a refund from the budget, and this problem will be...