Parliament • 31 October, 2018

Tax Amnesty and extension of Business Roadmap: experts on new opportunities for SMEs in the framework of the Address

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Development of small and medium-sized businesses is the basis of the economy of any country and one of the priorities of state policy. Issues of further strengthening the business environment were given exceptional attention in the Address of President Nursultan Nazarbayev “Growing Welfare of Kazakh Citizens: Increase in Incomes and Quality of Life.” More about the effectiveness of financial and non-financial business support measures in the report of

In his Address to the people of Kazakhstan, the Head of State notes that it is necessary to form stable sources of business growth, encourage private investment and promote market freedom. According to him, it is business that creates new jobs and provides most of Kazakhstanis with income.

Today, the Business Roadmap 2020 provides a wide range of various support tools, including financial and non-financial measures to stimulate entrepreneurship. As the Head of State noted, the business support program over the years of its existence has proven its effectiveness, which is confirmed by convincing statistics. Over the years of the program, more than 19 thousand projects were funded, which allowed creating about 90 thousand additional jobs, tax revenues to the state budget amounted to about 900 billion tenge. Therefore, it is obvious that there is an objective need to extend the business support program.

In the Address-2019, the President ordered to extend the Business Roadmap until 2025. The main emphasis was placed on increasing the protection of SMEs from unlawful administrative pressure and threats of criminal prosecution. From Jan. 1, 2019, according to the instructions of the President, a tax amnesty for business will be held, which provides for the cancellation of penalties and fines, subject to the payment of the principal amount of the tax.

Chairman of the Board of Baiterek National Management Holding Aidar Arifkhanov noted that the extension of the Business Roadmap program to 2025 is a great help to the population and, at the same time, a powerful incentive for the development of small and medium-sized businesses. So, it is planned to allocate up to 30 billion tenge annually for the implementation of the Business Roadmap. This will allow for three more years to create more than 20 thousand new jobs, ensure the flow of more than 220 billion tenge of taxes and production of 3 trillion tenge.

At the same time, the Address pays special attention to the promotion of Kazakhstani goods on international markets. In particular, it was instructed to allocate an additional 500 billion tenge to support the manufacturing industry and non-primary exports over the next three years. This is a very big help to our manufacturers.

Arifkhanov informed that in the next three years the holding plans to spend 300 billion tenge to support exporters, of which 95 billion tenge are funds of the Development Bank of Kazakhstan, 125 billion tenge — the return of previously allocated funds and 80 billion tenge — by attracting funds from the Republican budget for trade financing of the Development Bank.

It is worth noting that at present, through the mechanisms of the Development Bank of Kazakhstan, large-scale support of large business is being performed. Over the past three years, DBK has financed 15 major investment projects in the manufacturing industry and production infrastructure for over 280 billion tenge. The total export revenue of supported enterprises increased by more than 370 billion tenge. At present, DBK has formed a pipeline project (note: in the preparation process) for 2019 that costs 95.8 billion tenge.

To increase exports, Baiterek holding suggested redirecting a part of the released funds to support export-oriented projects. In particular, out of the allocated 100 billion tenge, it is proposed to allocate 25 billion tenge to finance social-entrepreneurial corporations. Of the allocated 200 billion tenge to support export-oriented SME projects, it is proposed to reorient 100 billion tenge. According to the holding's estimates, 1 tenge invested in pre-export financing generates 1.35 tenge of export earnings.

Acting Director of the Center for Entrepreneurship Development of the Economic Research Institute of the Ministry of National Economy Dinara Akynbekova shared an expert opinion on the effectiveness of financial measures to support SMEs provided for in the Business Road Map. The expert is confident that additional financial incentives for SMEs are new opportunities for growth.

“Of course, financial support tools, such as guaranteeing and subsidizing interest rates on loans, are of the greatest interest to Kazakhstani entrepreneurs. This is due to the high demand of the business for financial resources,” says Akynbekova.

At the same time, the additional funds for 30 billion tenge allocated within the framework of the Businass Roadmap-2025, in her opinion, will have a positive synergistic effect on the country's economy.

As Akynbekova noted, the allocated funds will allow to support about 4,000 projects of domestic entrepreneurs. In general, additional financial incentives will open up new business opportunities.

“Moreover, these measures are very relevant, because, as you know, business needs financial incentives. Conducted research shows that one of the constraining development factors for SMEs is the unavailability or certain limited financial resources. Therefore, such measures as the provision of guarantees along with subsidies are among the most common measures of support not only in Kazakhstan, but also in the world as a whole,” Akynbekova noted.

However, do not underestimate the non-financial support measures. Training services for both current and future entrepreneurs are in high demand. Non-financial support tools such as Business Growth and Service Support are in the greatest demand. Another type of business support is tax amnesty for small and medium-sized businesses, which will start Jan.1, 2019. It will not cover big business, subsoil users, manufacturers of excisable products and false enterprises.

Deputy Director of the Center for Scientific Economic Expertise and Research of the Economic Research Institute JSC Ksenia Zagal explained this procedure in detail for She said that the tax amnesty will be to write off only fines and penalties, subject to payment of the principal amount by December 31, 2019.

“Today in Kazakhstan, 66,933 subjects of small and medium-sized businesses have tax debts in the amount of 152.8 billion tenge, which was formed before Jan.1, 2018, and has not been repaid as of Sep. 1, 2018. Of these, the main debt is 80.3 billion tenge, fines and penalties — 72.5 billion tenge (59.5 billion tenge penalties and 13 billion tenge fines),” the expert said.

Meanwhile, according to her, there can be several reasons for the formation of principal debt: a fall in demand, a drop in production, a change in the market, a lack of awareness among businessmen about changes in tax legislation, and others. In this case, arrears of interest are accrued by the cumulative effect until the main tax debt is paid.

“Carrying out a tax amnesty next year will be a timely and necessary measure, it will help entrepreneurs start with a clean slate. Having a tax debt, the entrepreneur can not carry out expenditure transactions in cash and bank accounts, as well as dispose of their property. Having paid the main debt, he has the opportunity to fall under the tax amnesty and thereby completely get rid of the tax debt. This will allow him to unblock accounts, lift restrictions on the use of property and continue to conduct his business,” Zagal explained.

She also exemplified the experience of other countries. In foreign countries, tax amnesties are held periodically and have a significant success. The positive world experience in conducting a tax amnesty for businesses is known in the United States. Thus, in 2013 in Los Angeles, a tax amnesty brought the budget almost five times more than predicted: with a plan of $5.5 million, the budget received $24.3 million from 9,246 enterprises.

In general, tax amnesty for small and medium-sized businesses is of strategic and economic nature, since it is small and medium-sized businesses that are the driving force in the socio-economic development of Kazakhstan in terms of providing employment to the economically active population of the country and contributing to the country's GDP.

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