By Aygul Salmanova
Ministry of Taxes intends to pursue a stimulating tax policy, said Minister of Taxes Mikayil Jabbarov while making remarks at the conference on “Taxes. Transparency: Development’ held on February 13.
“This action will contribute to the acceleration of the economic growth,” he said. “The reforms being implemented in the field of taxes will serve to the creation of a transparent tax system and an attractive tax sphere.”
Touching upon an increase in the amount of tax revenues, he added that an expansion of the taxable base will be one of the main goals of the ministry.
It is necessary to distinguish conscientious taxpayers from those who do not pay taxes,” Jabbarov said. “The conscientious taxpayer has the right to make mistakes. The task of tax authorities is not to wait for this mistake but to prevent it in every possible way.”
“This approach requires a revision and expansion of the concept – ‘services rendered to taxpayers’,” he said. “The Ministry of Taxes is able to distinguish correct tax planning from tax evasion. We perceive correct tax planning positively, but see tax evasion as a crime. We will do our best to make punishment unavoidable [for this crime].”
Jabbarov added that presently, the Ministry proposes taxpayers to pay taxes voluntarily, and this according to him shows the existence of healthy relations between tax authorities and taxpayers and will serve to enhance the role and authority of entrepreneurs in the society.
New package of amendments
The Ministry is developing a new package of amendments to the Tax Code, said Jabbarov, which will help solve key problems in the tax administration that entrepreneurs face.
“This package will be submitted to the Government for consideration as part of the process of forming the 2019- state budget. The main attention will be paid to reducing the share of the shadow economy and encouraging the transition to a legal economy. We intend to ensure this transformation so that it becomes favorable for entrepreneurs. We are ready to cooperate both with businessmen, and with the government and parliament to develop the changes,” he said.
The minister noted that changes in economic policy require appropriate changes to the Tax Code, but frequent changes complicate the planning process for entrepreneurs, and additives can lead to unplanned tax risks.
He said it is necessary to ensure the stability of the legislation and direct it to support the entrepreneurship development. First of all, according to Jabbarov, it is necessary to monitor the tax legislation, assess the effectiveness of the existing system of preferences and the possibilities for further improving the tax system.
He also added that Azerbaijan needs to stimulate expansion of non-cash payments.
“It is necessary to stimulate the expansion of non-cash payments, as well as the interest of businesses and citizens in non-cash settlements. The taxpayer must be sure that only transparent activities will ensure his stable profit and development,” Jabbarov said.
The minister also noted that transparency will be ensured in the tax system of Azerbaijan and extensive work is ongoing in this direction.
Jabbarov noted that improving the principles of working with taxpayers and holding tax supervision by using information technologies will become the main goal of the ministry.
The minister noted that the fiscal burden of taxpayers should be distributed evenly. Fiscal obligations should be formed based on real growth indicators and in accordance with the revenues received, he added.
Jabbarov also noted the need to eradicate corruption in the tax authorities.
“We have already begun to clean up our own ranks, and this process will continue,” he said. “At the same time, we will re-define the powers and responsibility of the tax authorities. All disputable issues will be explained with the participation of a taxpayer to prevent unreasonable financial sanctions.”
Jabbarov also noted that the Ministry may reduce the number of inspections.
“We can reduce the number of tax inspections and will do this. But this step does not mean weakening the control system. Tax inspections should be carried out remotely, using innovative tools such as a tax risk management system,” he said.
Jabbarov went on saying that the Ministry will study application of approaches based on the blockchain technology, which will help organize the work of tax authorities at a higher level.
“Each taxpayer must have access to any service at any time and from any place,” he said. “The new technologies must completely transfer contacts with taxpayers to the e-format and enable to achieve transparency in these relations,” the minister said.
Country needs to increase taxpayers
Speaking at the event, Ziyad Samadzade, chairman of the parliamentary committee on economic policy, industry and entrepreneurship noted that Azerbaijan needs to increase the number of taxpayers.
An increase in the number of taxpayers will significantly increase tax revenues to the state budget without need to resort to increase the tax burden, he said.
“Sometimes the tax burden remains unchanged for years, while the growth of tax revenues is achieved due to the increase in the number of taxpayers,” he said. “However, we have problems caused by the difficulties Azerbaijan faced during the transition to the non-oil economy. We exempted the population working in agriculture sphere from taxes, and this makes 35-36 percent of economically active population.”
The MP noted that the low number of taxpayers negatively affects the image of the Azerbaijani state as well.
“Economically active population grows every year in Azerbaijan, new jobs are opened, but the number of taxpayers doesn’t grow,” he said. “This is a serious problem and we need to solve it. It is necessary to improve labor relations, especially in construction sphere. Presently, the funds collected from the payment of taxes account for only 8-9 percent of GDP. This is a very low indicator. That’s why we must improve transparency in this area.”
Samadzade also noted that it is necessary to differentiate the rates of value-added tax (VAT) in Azerbaijan.
“How much it is necessary to set the rates for VAT at the same level for all? I think that it is necessary to set priorities and differentiate VAT rates. You can apply different rates - six, seven, ten percent, and so on,” said Samadzade.
Earlier, the Taxes Ministry of Azerbaijan studied the possibilities of differentiation of VAT and developed an appropriate bill. But when submitting the bill, the Ministry faced with discontent of a number of state bodies and structures, as a result of which the document was never adopted.
Investments in Azerbaijan’s economy within BP
During 25 years of BP’s activity in Azerbaijan, over $69 billion have been invested in Azerbaijan’s economy as part of the projects in which BP is the operator, said Bakhtiyar Aslanbayli, BP-Azerbaijan Vice President for Communications and External Affairs, Strategy and Region.
He added that during that period 3.3 billion barrels of oil were produced only within the Azeri-Chirag-Gunashli (ACG) field development project.
“Moreover, 89 billion cubic meters of gas and 176 million barrels of condensate were produced within the Shah Deniz gas condensate field development project,” he added.
President of American Chamber of Commerce in Azerbaijan (AmCham) Nuran Kerimov, in turn, noted that private tax declaration system must be implemented in Azerbaijan.
A taxpayer must be sure of collected money being spent on important social and economic initiatives, he noted.
The head of AmCham also proposed to revise fiscal tax load.
“The corporate tax load in Azerbaijan is not too high; nevertheless the fiscal tax load should be revised. Current tax load is too heavy for the employees and entrepreneurs. It is high time to consider this,” Kerimov added.
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