Deputy Prime Minister, Minister of National Economy Serik Zhumangarin presented a new tax reform at an expanded government meeting, which provides for a reduction in the threshold for Value Added Tax (VAT) to 15 million tenge.
According to Informburo.kz, he outlined the government's plans to increase the VAT rate. The ministers will discuss these amounts with members of parliament.
In turn, President Kassym-Jomart Tokayev supported the government's proposal.
"Go ahead, get on with it. I confirm that the reform is necessary. But now we are faced with the task of reducing the number of transfers from the National Fund and strengthening its savings function. The accumulated funds need to be directed towards financing major infrastructure projects. In this way, we will strengthen the state's development function. However, I believe we need to work through this point," Tokayev said.
The President noted that the task of diversifying the economy in Kazakhstan remains unfulfilled, which is reflected in the continued dependence on funds from the National Fund.
_____________
For reference: economic diversification is the process of expanding and complicating the structure of a country's or region's economy, whereby dependence on one or several key sectors is reduced.
At the same time, Zhumangarin reported that against the backdrop of the tax rate increase, the government plans to abolish the social tax and mandatory pension contributions.
"With the increase in the VAT rate, businesses will naturally incur additional costs. The state is ready to compensate for these. First of all, we would like to draw attention to the fact that we have one of the highest burdens on the wage fund. This is where the biggest problem of our economy lies. The burden on the wage fund paid by businesses is around 40%. And this is part of the cost of goods," the minister said.
According to him, this leads to higher product prices and reduces their competitiveness.
"If the VAT rate is increased to the planned level, we are ready to significantly reduce the burden on the wage fund by an average of 10% to 30%, through the abolition of the social tax and mandatory employer pension contributions. The budget will be able to cover these expenses," added Serik Zhumangarin.
He emphasised that the government is considering ways to redistribute other types of taxes from the republican budget to local budgets.