Olzhas Bektenov urged businesses to pay their fair taxes within two weeks.

The Prime Minister of Kazakhstan, Olzhas Bektenov, held a working meeting with the Deputy Prime Minister and Minister of National Economy Serik Jumangarin and the Minister of Finance Madi Takiyev. They discussed issues related to tax and budget reform and enhancing control over tax revenues, as reported by inbusiness.kz citing the press service of the government.

Finance Minister Madi Takiyev reported that during the ongoing analysis, instances of the use of special tax regimes (STRs), previously introduced to support and develop small businesses during their establishment, have been identified as legal schemes for tax obligation optimization by unscrupulous taxpayers.

Currently, there are 2.3 million registered taxpayers in Kazakhstan. Of these, only 8%, or 137,000, are VAT payers. Overall, 81% of all entities operate under a special tax regime with simplified declarations, with 85% of them reporting incomes of up to 15 million tenge.

"We have conducted an analysis of the mutual settlements of entities applying special tax regimes with companies operating under the general tax regime. The analysis revealed that mutual settlements between such regimes have doubled over the past year, rising from 5 trillion to 10 trillion tenge. Out of a total turnover of 16 trillion tenge under special tax regimes, mutual settlements with the general tax regime account for 10 trillion tenge. In other words, while earning hundreds of billions of tenge, taxpayers pay minimal taxes," said Madi Takiyev, who outlined several fragmentation schemes used by businesses.

To optimize taxes and dilute profits, companies adhere to the principle of increasing "documentary" costs. One company purchases goods and resells them at cost to another legal entity operating under a simplified regime. As a result, the first company shows a loss, while the second, taking advantage of favorable conditions, avoids paying VAT.

Additionally, businesses are divided into several legal entities. For instance, in one establishment, the bar, kitchen, and karaoke are registered as separate companies, or each floor of a hotel belongs to different individual entrepreneurs. When the income of one reaches the threshold of 78 million tenge, the activity ceases, and another legal entity takes its place, allowing them to evade VAT payments.

"To reduce the burden on the wage fund, employees of the enterprise are removed from the staff, registered as individual entrepreneurs, and provide services to their former employer not as employees, but as separate entities. Consequently, tax payments to the wage fund decrease, and social responsibility is shifted from the employer to the entrepreneur," Madi Takiyev reported.

In this regard, to improve tax administration, the Ministry of Finance of the Republic of Kazakhstan proposes several measures to combat fragmentation:

• introduce a legislative criterion for business fragmentation;
• implement the principle of form prevailing over substance in tax disputes;
• introduce methods for controlling and proving such facts;
• limit types of activities for individual entrepreneurs.

"From the information provided by the Minister of Finance, it is clear that unscrupulous entrepreneurs, using various tax optimization schemes, are behaving inappropriately. With billion-tenge turnovers, they pay amounts to the budget that are completely disproportionate to their profits. We have a complete list of such large companies, including well-known construction firms like BI Group, BAZIS, and many others, as well as popular restaurants, fitness clubs, and various companies operating in other sectors of the economy.

Taking this opportunity, I would like to address the owners and leaders of large companies that are employing various tax optimization schemes. Today or tomorrow, your companies will receive notifications from the tax authorities regarding the need to pay additional tax amounts.

I urge everyone to submit additional tax declarations to the tax authorities within two weeks and pay fair tax amounts.

If these actions are not taken, the state reserves the right to apply all available resources at its disposal, including fiscal and law enforcement.

The conversation will be tough, but we are ready for dialogue if business is willing to behave justly towards the state," emphasized Olzhas Bektenov.