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Azerbaijan’s non-oil sector gains dominant role

8 February 2013 18:08 (UTC+04:00)
Azerbaijan’s non-oil sector gains dominant role

By Gulgiz Dadashova

In the backdrop of the post-crisis period, Azerbaijan's non-oil sector managed to maintain dynamic development in 2012. The country recorded a 9.7 percent growth rate in the non-oil sector and its share in GDP reached 52.7 percent. This is the most important indicator posted in recent years, as the government's long-term goal is to diversify the domestic economy and to minimize its dependence on the oil and gas factor in the future.

A clear proof of the positive developments seen in the economic life of the country was the growth of revenues of the Azerbaijani Ministry of Taxes, which was achieved through the expansion of the taxation framework, strengthening of the administration in the area of ​​non-cash payments and provision of favorable environment for entrepreneurs. Tax transfers from the non-oil sector to the state budget in 2012 amounted to 3.287 billion manats ($4.187 billion), which exceeded the 2011 figure by 14.5 percent.

Non-oil sector growth

A clear trend is observed in Azerbaijan in recent years -- the non-oil sector is gradually acquiring a dominant role in ensuring tax revenues for the state coffers.

"The average annual growth of the non-oil economy in the past ten years exceeded 10 percent, which is a high figure," Deputy Economic Development Minister Sevinj Hasanova told the forum "The tax system in Azerbaijan: realities and prospects" on Friday.

According to Hasanova, the reduction of the tax burden on the non-oil sector has contributed to significant growth over the past decade.

"Over the past ten years, Azerbaijan's GDP grew by 3.7 times and non-oil GDP by 2.3 times. Thus, the ratio of tax revenues from Azerbaijan's non-oil sector to the volume of non-oil GDP was 10 percent in 2012, which exceeds the figure of 2003 by 1.5 percent. This suggests that during the reporting period the tax burden on the non-oil sector was reduced, tax benefits and optimal rates contributed to the growth of the non-oil sector," Hasanova said.

Hasanova said that in 2012, the main economic achievements of the country were associated with the development of the non-oil economy, which grew 9.7 percent to 28 billion manats. Over 75 percent of the capital investment amounting to 20 billion manats made in the economy in 2012 accounted for the non-oil sector. Since 2007 more investment has been made in the non-oil sector, rather than the oil sector.

Minister of Taxes Fazil Mammadov also touched on the growth in the non-oil sector, noting the positive trends observed in the share of the regions in this achievement.

He said the growth is achieved not only by improving the tax administration, but also through the promotion of entrepreneurship and creation of new jobs throughout the country.

"Implementation of state programs on the socio-economic development of the Azerbaijani regions increased the regions' share in non-oil GDP," Mammadov said addressing the forum.

Azerbaijan has adopted two state programs on social and economic development of the regions, which covered the years 2004-2008 and 2009-2013, respectively.

"Prior to the implementation of these programs, the share of the regions in non-oil GDP was three percent, but today the figure has reached 14 percent," Mammadov said.

Efforts on the optimization of the tax burden and support of private enterprise by the Tax Ministry is to be fully reflected in the forthcoming action plan as part of the "Azerbaijan 2020: a look into the future" concept.

The plan, which is being developed by the ministry, will be approved next month and reflects measures on the provision of all services by the ministry in electronic form, improvement of the tax laws to ensure greater support to the investment environment and bringing the legal framework into compliance with the European one.

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