Azerbaijani expert talks importance of tax incentives for country's private sector
Tax incentives for the private sector are essential for revitalizing the national economy, Azerbaijani expert in economic issues, Professor of Azerbaijan State University of Economics (UNEC) Elshad Mammadov told Trend on April 23.
“Accordingly, a two-fold reduction in the tax rate for a certain category of taxpayers is one of the mechanisms to stimulate business activity during the difficult period of a pandemic,” he said.
Mammadov noted that in terms of reducing the fiscal burden, the tax changes introduced are a strong driving force for economic growth, although they cannot fully replace the more substantial monetary credit stimulation.
“At the same time, the tax reform processes associated with the deepening of the incentives for entrepreneurs should be of a protracted, sequential nature and as new risks arise for the stability of the country's economy, it will also be necessary to make new decisions,” said the expert.
Mammadov added that along with reforms in the socio-economic and tax policies, the most relevant for the national economy’s restoration now is the growth of innovation and investment activity, money supply growth and credit stimulation of the economy with adequate rates of no higher than 3 percent.
Moreover, according to the expert, the Central Bank of Azerbaijan should carry out targeted financing of the economy through commercial banks implementing a differentiated credit policy for each sector of the economy to finance the real sector at rates below the level of profitability in a particular sector of the economy.
"Only in this way we can increase business activity in the economy’s real sector, which is extremely important. As for the tax policy - in conditions when it’s needed to increase the competitiveness of the high-tech spheres of the national real sector, we need to gradually distance from value added tax," Mammadov said.
At the same time, he noted, it’s necessary, especially in the conditions of increasing the money supply, to prevent its leakage onto the foreign exchange market and its generation in the financial market, and to ensure its transition to the real sector of the economy.
“This requires the introduction of effective control over the movement of capital, primarily cross-border financial assets. It’s also necessary to introduce currency restrictions and a tax on speculative currency transactions in order to limit as much as possible the effect of speculative capital on the country's foreign exchange market,” the expert added.
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