Budget execution, counteracting shadow economy and new tax policy

In Kazakhstan at the end of 2023, budget execution amounted to 100%. Realization of all accepted obligations of the state, first of all social ones, was ensured.

The stability of the economy was preserved and the objective of 100% financing of the budget deficit and maintaining public debt at a safe level was achieved. It amounted to 22.9% of GDP (27.2 trillion tenge), which does not exceed the limit of 32% of GDP established by the Concept of Public Finance Management until 2030 (data as of 01.01.2024). 

On the instructions of the Head of State, a new Budget Code has been developed, the adoption of which will strengthen the role of Parliament, accountability of the Government, increase the independence of state bodies. The draft code provides a basis for ensuring a lean and frugal budget policy with the application of appropriate rules. It also provides for simplification of the budget process, introduction of block budgeting, ensuring results management, etc.

A new Tax Code has also been developed, in which the main emphasis will be placed on the introduction of a service model of tax administration. The taxpayer will be provided with fiscal assistance - from the moment of registration to deregistration. 

Tax reporting will be reduced by 30%, at least 20% of benefits will be canceled. Full digitalization of business processes of tax administration will be implemented. For new projects in the manufacturing industry, incentives will be granted for 3 years.

Another achievement in 2023 was the creation of a modern institute for the restoration of solvency and bankruptcy of citizens. 78 thousand applications for out-of-court bankruptcy were received. 8 thousand citizens were recognized bankrupt for more than 15 billion tenge.

One of the positive results of the year is the launch of the project "National Fund for Children". Legislative changes came into force, which will allow more than 7 million young Kazakhstani citizens to receive the first accruals. More than 300 thousand children will be able to use the resources of the National Fund in this year to pay for education and improve living conditions. 

To attract private capital into the economy, the Comprehensive Privatization Plan is being implemented, which has been executed by 68%. SPO of 5.6% of shares of "Kegoc" JSC was held. Air Astana, Samruk-Energo (in 2024), QazaqGaz and KTZ (in 2025) are also planned for IPO/SPO. Based on the experience of OECD countries, Kazakhstan will reduce the share of the state in the economy to 14% by 2025.

The electronic queue system "CarGoRuqsat" has been introduced at the entire external border of the EAEU, which is the main tool for regulating the situation with traffic congestion at the border and ensures full transparency of the process of its passage. 

In order to create conditions for information support of customs control, international agreements on organization of exchange of preliminary information on goods and vehicles have been concluded with 10 states, including China, Turkey, Uzbekistan, and others. 

In order to reduce the shadow economy and the level of corruption, ensure fair taxation and improve social policy, Kazakhstan is gradually introducing universal declaration. All citizens of the republic must pay taxes in proportion to their income, and the state in turn will see the real income of the population and will be able to better build social policy. 

Thus, since January 1, 2021, declaration has affected civil servants, persons equated to them and their spouses - a total of about 580 thousand people. From January 1, 2023 declarations began to provide employees of state institutions and quasi-public sector (and spouses) - more than 2 million people. From January 1, 2024, declaration for managers and founders (participants) of legal entities, as well as individual entrepreneurs and their spouses - about 4 million people.

In 2025, the final stage will take place, in which the remaining part of citizens will provide an input declaration of assets and liabilities. These are about 6.4 million people - salaried employees of private structures, pensioners, students and the unemployed. 

In case of difficulties with filling in the declaration, Kazakhstan citizens can apply to the call-center 14-14 (round the clock), to the State Revenue Department at the place of residence (contacts and addresses are specified on the website of the State Revenue Committee). There are also step-by-step video instructions in social networks. If there are errors or inaccuracies, citizens can correct them themselves by filing an additional declaration within the statute of limitations provided for by the Tax Code.

An innovation introduced in 2024 is mobile remittance verification, which aims to bring illegal business activities out of the shadows. Some entrepreneurs receive payment for goods or services through mobile transfers. In this case, cash registers, POS terminals and QR codes are not used. Accordingly, no checks are issued and consumer rights are infringed. 

All transfers of citizens are not subject to control and there will be no mass inspections. For this purpose, Kazakhstan has developed criteria for determining entrepreneurial activity. Only persons who have received mobile transfers from 100 or more different persons on a monthly basis, for three consecutive months, will fall under the verification criteria. All checks are assigned based on a risk management system. It emphasizes pinpoint attention and only on high-risk taxpayers, bona fide businesses are not caught in the orbit of audits. 

In the country now it is much more profitable to fulfill tax obligations in good faith. At the legislative level, conditions for preferential taxation of micro and small businesses have been created. In particular, tax rates for them are from 1% to 4% depending on the type of activity. The taxation regime can be selected through the mobile application "e-Salyk Business", where taxes and social payments are automatically calculated and paid. 

Measures taken within the framework of the Comprehensive Plan to counteract the shadow economy allowed to achieve a reduction in its level from 27% of GDP in 2018 to less than 19% (by the end of 2022). The Government's priority task is to reduce the share of shadow economy to the level of OECD countries - less than 15% of GDP in 2025.

The introduction of retail tax in a new format (income per year - 2.2 billion tenge, number of employees up to 200 people) was a big step in creating legislative conditions to stimulate the withdrawal of business from the shadow economy. The list of activities was expanded from 190 to 364 types of activities related to retail trade and mainly provision of services to the population. The peculiarity of this regime is that taxpayers applying retail tax are not VAT payers.

Conscientious entrepreneurs who comply with all the requirements of the legislation, including those who work only by cashless payment, are already excluded from tax control on the basis of the RMS and pass customs procedures through the "green corridor". Within the framework of the new Tax Code with the introduction of service-oriented administration, such companies will be provided with additional incentive measures. Among them are simplified deferral of payments, accelerated VAT refund and other measures.

In order to reduce business costs, the following issues are being worked on:

  • reduction of acquiring cost for POS-terminal service and QR-payments;
  • finalization of payment systems of STBs in terms of possibility of online opening of accounts for entrepreneurial activity;
  • improvement of payment systems of STBs for the possibility of cash (fiscal) check generation in the mobile banking application and subsequent inclusion in the list of fiscal data operators;
  • increasing cashback or other motivational tools for customers on cashless payments (QR-payments, bank cards, etc.)..

The current legislation provides for various payment methods - by bank card, QR-payment or cash (Article 25 of the Law "On Payments and Payment Systems"). Refusal to accept non-cash payments is unlawful and violates consumer rights, for which administrative liability is provided. All monetary settlements, including cash payments, must be made with the use of cash registers. 

The check of mobile transfers will not affect the collection of funds for medical treatment, which are not subject to taxation, as they are not income from entrepreneurial activity. In addition, today in the state revenue authorities are registered 405 bloggers, which at the end of 2023 paid taxes in the amount of about 210 million tenge. These citizens receive income, respectively, it is reflected in their declarations. Recall that since 2023 the Law "On online platforms and online advertising" is in force, according to which advertising placed in social networks is subject to labeling (this information is transferred to the state revenue authorities).

Private carriers and couriers need to register as an individual entrepreneur. This can be done through the mobile applications "e-Salyq Business", "Egov Mobile" and applications of some second-tier banks. For them, the tax rate is 1% of income (today there are more than 310 thousand IEs working). 

Many taxpayers, including cab drivers are already using the mobile application "E-Salyq Business".  To accept non-cash payments, it is possible to open an entrepreneurial bank account online, where payments for services rendered will be received. All you need is a smartphone, and there is no need to carry cash registers and POS-terminals. 

Within the framework of the new Tax Code it is planned to introduce a new tax regime "Platform Employment", which implies the provision of an opportunity for private carriers to fulfill tax obligations without registering a sole proprietorship. From 2025, the payment of taxes will be entrusted to platform operators, who will act as tax agents for cabbies working with them. 

In rural areas, in the absence of the Internet, it is allowed to use cash registers without the functions of fixation and transmission of fiscal data (stand-alone cash registers).

On all the introduced innovations, including universal declaration and mobile transfers in Kazakhstan, extensive explanatory work with the population continues.

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