A new tax reform: A Boost for the Economy or a Burden on Business?

The long-anticipated draft of Kazakhstan’s new Tax Code has officially been submitted to Parliament. Last week, Minister of National Economy Serik Zhumangarin presented the document to lawmakers, initiating debates among policymakers, experts, and business communities alike. The key question now stands: will this legislative overhaul advance the nation’s economic development, or—as some fear—place undue pressure on small and medium-sized enterprises?

At the heart of the controversy lies the proposed adjustment to the value-added tax (VAT). The government had suggested increasing the VAT rate to 20 percent, aiming to bolster budget revenues. However, the business sector responded with strong resistance, warning of negative consequences for entrepreneurs and consumers. The matter drew further attention when President Kassym-Jomart Tokayev addressed the proposal publicly, signaling his reservations.

“The new Tax Code must strike a reasonable balance between attracting investors and ensuring the state budget receives sufficient revenue,” President Tokayev stated during an extended Government meeting. “Yet, within the business community, there is a growing perception that the draft primarily focuses on raising tax rates. In Kazakhstan, the very nature of the VAT has shifted over time—it requires reform. Merely increasing it from 12 to 16 percent will not solve the underlying issues. Experts have rightly noted that such a move may expand the shadow economy and fuel inflation. This step could also negatively impact our investment climate”, said Tokayev.

The President also voiced criticism of the previous Government’s strategy of replacing National Fund transfers with higher tax burdens to generate additional revenue. He made it clear that, as Head of State, he was dissatisfied with how the new Tax Code was being developed.

“We must understand the critical importance of ensuring robust and high-quality economic growth. Without implementing a new system of taxation for income and property, without incentivizing entrepreneurs to reinvest profits back into their businesses, and without revising special tax regimes, we will fall short of our goals,” he warned. “Drafting a strategic document like the Tax Code must involve not only tax experts, but also economists and representatives of the business community. And while it’s essential to ensure a steady flow of revenue to the budget, we must remember this principle: the stronger the economy, the higher the tax returns”, said Tokayev.

As the draft Tax Code proceeds through parliamentary scrutiny, it remains to be seen whether the final version will adequately reflect the concerns of the business sector while meeting the fiscal needs of the state. For now, public debate continues, reflecting the broader tension between reform, revenue, and economic sustainability.

President Kassym-Jomart Tokayev has emphasized that tax hikes cannot be imposed arbitrarily. He stated that before raising taxes, the government must first refine and modernize the country’s taxation system. Additionally, he stressed the importance of minimizing the shadow economy, warning that even the most well-designed tax policies will prove ineffective if the overall administration and governance of the tax system are not properly organized.

"The government must develop clear and transparent rules for granting tax exemptions," Tokayev said. "According to the Ministry of Finance, tax exemptions result in an average annual shortfall of nearly 7 trillion tenge to the state budget. I issued an instruction to reduce tax exemptions by 20 percent. However, this directive has not been fulfilled, and to date, no concrete solutions have been proposed."

The President also criticized the lack of progress on a policy aimed at simplifying tax payments for micro and small businesses. The initiative called for a one-time payroll-based payment, but despite being introduced more than a year ago, it remains unimplemented in practice.

"The responsible authorities have reported successful implementation," he said. "Yet business owners continue to make separate payments for taxes and contributions to extra-budgetary funds, as they did before”, said Tokayev.

The Role of VAT: From 0% to 16%

Following extended consultations with experts, economists, financiers, and business representatives, the government has now submitted a revised draft of the new Tax Code to the current Parliament. Under the proposed legislation, the value-added tax (VAT) will be set at a maximum of 16 percent. The threshold for VAT liability has also been clarified and will be set at 40 million tenge.

Importantly, certain sectors will be exempt from VAT altogether. These include socially significant food products, book publishing, and archaeology. In the fields of healthcare and social services, the government will define a specific list of medicines that will be exempt from VAT. The tax will only apply to paid medical services, and the applicable VAT rate in such cases will be set at 10 percent.

Value Added Tax (VAT), also known as Goods and Services Tax (GST) in some countries, is a widely used consumption tax that applies to the value added at each stage of production or distribution. VAT is often seen as an efficient way to raise government revenue because it is applied to a broad range of goods and services, with businesses collecting the tax and passing it on to the government. In many countries, VAT is a significant source of public revenue, and several nations have implemented relatively high VAT rates to finance social programs, infrastructure, and public services.

Global VAT Trends

Hungary holds the title for having the highest VAT rate in the European Union and among the highest in the world. The standard VAT rate in Hungary is 27%, which is imposed on most goods and services. This rate is significantly higher than the EU average, which typically ranges from 17% to 25%.

The high VAT rate in Hungary is part of the government’s strategy to raise funds for public expenditure, as VAT is a major source of revenue for the Hungarian government. Despite the high tax rate, Hungary has a relatively low unemployment rate, and the revenue generated from VAT is used to finance healthcare, education, and infrastructure projects.

However, there is criticism of Hungary's high VAT rate, particularly from consumer advocacy groups, who argue that it disproportionately impacts lower-income households. Essential goods, such as food and medicine, are often subject to reduced VAT rates or exemptions, but non-essential goods and services face the full 27% tax rate.

Sweden is known for its robust social welfare system, which includes universal healthcare, free education, and generous social benefits. To finance these extensive public services, Sweden imposes one of the highest VAT rates in the European Union, set at 25%.

In addition to the standard VAT rate, Sweden also has reduced rates of 12% and 6% for certain goods and services, such as food, hotel accommodations, and books. The higher VAT rate helps Sweden maintain its generous welfare programs, which are among the most comprehensive in the world.

The Swedish government’s approach to VAT is part of a broader economic model that emphasizes wealth redistribution and social equality. The higher VAT rate allows Sweden to fund its high-quality public services, but it also means that consumers pay more for goods and services, which can be a burden for low-income families. However, the Swedish government compensates for this with various social safety nets, such as unemployment benefits and subsidized healthcare.

Countries with High VAT Rates

Denmark is another Scandinavian country with a high VAT rate of 25%. This tax is essential for funding Denmark's extensive welfare programs, which include universal healthcare, free education, and social housing. The Danish model is based on high taxes and a strong social safety net, which aims to provide equal opportunities for all citizens.

The VAT system in Denmark applies to a wide range of goods and services, but there are reduced rates for specific items such as food, books, and public transportation. Despite the high tax burden, Denmark consistently ranks high in global quality-of-life indices, with high levels of education, healthcare, and social welfare.

The high VAT rate in Denmark is part of the country’s larger approach to taxation, which includes high income and corporate tax rates. This comprehensive tax structure helps ensure that the government can fund its extensive public services while maintaining a high standard of living for its citizens. However, the high VAT rate has faced criticism from some who argue that it places a heavy burden on middle- and low-income consumers.

Norway, like its Scandinavian neighbors, has a high VAT rate of 25%. The country’s VAT system is part of a broader taxation strategy designed to fund the welfare state, which includes universal healthcare, generous pensions, and free education. Norway's social model is built on high taxes and extensive public services, with VAT playing a critical role in generating revenue for these programs.

In addition to the standard VAT rate, Norway applies reduced rates of 15% and 8% for certain goods and services, such as food, books, and public transportation. Despite the high VAT rate, Norway consistently ranks among the wealthiest and happiest countries in the world, with high levels of public trust in government and strong social cohesion.

The high VAT rate in Norway is accepted by many citizens due to the quality of public services they receive in return. However, some argue that the VAT system disproportionately affects lower-income households, as basic goods and services are subject to high taxes. As a result, Norway has implemented various income redistribution mechanisms to mitigate the impact on lower-income groups.

Finland’s VAT system is also among the highest in Europe, with a standard rate of 24%. Like its Nordic neighbors, Finland uses VAT as a key source of revenue to fund its welfare state, which includes universal healthcare, free education, and comprehensive social benefits. The high VAT rate helps finance these programs, which contribute to Finland’s high standard of living.

In Finland, the VAT system is progressive in nature, with reduced rates applied to goods and services such as food, books, and pharmaceuticals. The government also provides various subsidies and benefits to low-income households to ensure that they are not disproportionately affected by high VAT rates.

Finland’s VAT system is widely regarded as fair and efficient, and it plays a key role in supporting the country’s social safety net. However, as in other high-VAT countries, there is ongoing debate about the potential negative impact on consumers, particularly those in lower-income brackets.

Croatia, a European Union member state, has implemented a VAT system with a standard rate of 25%. This is among the highest VAT rates in the region, and the government has gradually increased the rate over the years to bolster public finances and support economic development.

The VAT revenue is used to fund various public services, including healthcare, education, and infrastructure development. However, the high VAT rate in Croatia has raised concerns about its impact on low-income consumers, particularly in a country with a relatively low average wage. In response, the Croatian government applies reduced VAT rates to certain essential goods, such as food and medicine, to ease the tax burden on consumers.

Despite the challenges, Croatia has experienced economic growth in recent years, and the high VAT rate plays an important role in supporting the country's development goals. However, debates continue about the fairness of the VAT system, with some calling for reforms to make the tax structure more progressive.

The United Kingdom operates a VAT system with a standard rate of 20%, which is considered moderate by European standards. VAT is a significant source of revenue for the U.K. government, and the tax is applied to most goods and services, with exemptions for essential items such as food, children’s clothing, and books.

While the U.K. VAT rate is not as high as those in Scandinavian countries, it is still an important component of the tax system, funding a wide range of public services, including the National Health Service (NHS). The government uses VAT in conjunction with other taxes, such as income and corporate taxes, to generate the revenue necessary for public expenditure.

The U.K.'s VAT system is viewed as a relatively efficient means of taxation, but it has also faced criticism for disproportionately affecting low-income households. Some argue that the VAT system places a regressive burden on consumers, especially when essential goods are subject to the full tax rate.

High VAT rates are an important tool for governments around the world to finance public services, reduce budget deficits, and promote economic development. Countries with high VAT rates, such as Sweden, Denmark, and Hungary, use the revenue to fund generous welfare programs, universal healthcare, and infrastructure development. These programs contribute to high living standards, economic equality, and social cohesion.

However, high VAT rates can also have drawbacks. The main concern is that they disproportionately affect lower-income households, as basic goods and services are subject to the tax. While many high-VAT countries mitigate this impact with exemptions and reduced rates for essential goods, the overall tax burden on consumers remains a point of contention. As global economic conditions change, governments may need to adjust their VAT rates and structures to ensure fairness and sustainability. Ultimately, the challenge lies in balancing the need for public revenue with the goal of protecting the most vulnerable members of society.

Proposed Changes in the New Tax Code

Corporate income tax in the social sector is also set to change. Starting in 2026, it will be fixed at 5 percent, and by 2027, it will increase to 10 percent.

As the legislative process continues, these changes reflect the government’s intent to balance revenue generation with economic inclusivity—while still responding to the concerns of entrepreneurs and the broader public.

According to Kazakhstan’s Minister of National Economy, Serik Zhumangarin, the new Tax Code introduces significant changes—including the imposition of value-added tax (VAT) on banking operations. To prevent this from leading to increased service costs, the Competition Protection Agency will collaborate with the government to monitor pricing and ensure fairness.

One notable shift in the proposed reforms involves the transition from a list of permitted business activities under the special tax regime to a list of prohibited activities. This means all business activities will be allowed unless specifically restricted.

In agriculture, however, existing tax benefits will remain unchanged. Agricultural producers will continue to benefit from a 70 percent tax reduction. Meanwhile, the processing industry will be taxed at the standard corporate income tax rate of 20 percent.

“We are reducing the number of taxes, fees, and charges,” said Zhumangarin. “Instead of 12 taxes, there will be 11. Two of the 10 existing fees—those for advertising placement and license usage—will be eliminated. Additionally, three other payments—related to the use of water resources, forests, and wildlife—will be consolidated into a single fee for the use of natural resources.”

The minister noted that the number of payment rates will be cut from 77, and six types of levies will be eliminated, removing 34 associated rates. Furthermore, five categories of state duties will be abolished, resulting in 51 fewer duty rates.

Tax exemptions are also being streamlined. Based on tax declaration data, 453 provisions totaling 3.4 trillion tenge have been classified as exemptions. Currently, the government proposes eliminating 128 of these, amounting to over 1.3 trillion tenge.

“We are building a new, transparent system regarding tax benefits,” Zhumangarin explained. “We will clearly define what qualifies as a tax benefit, along with the criteria for granting, extending, or reducing these incentives. Their effectiveness will be reviewed annually.”

The tax rates themselves are being refined. The base corporate income tax (CIT) rate will remain at 20 percent, but higher rates will apply to specific sectors. The banking and gambling sectors will be subject to a 25 percent CIT rate.

For financial leasing and the social sector, a gradual increase of the CIT rate to 10 percent is being proposed. In contrast, the CIT rate for agricultural producers will remain at 3 percent. The government also intends to introduce additional incentives for investors, including those engaged in geological exploration.

These changes reflect a broader effort to simplify Kazakhstan’s tax system while maintaining fiscal discipline and encouraging investment across priority sectors.

The draft of Kazakhstan’s new Tax Code includes provisions allowing 100% deductions for costs related to construction, the purchase of equipment and software, and subsequent upgrades and modernization. This measure has received support from both experts and economists.

During parliamentary discussions, lawmakers also debated the validity of maintaining tax breaks for construction companies. MP Bakytzhan Bazarbek called on Minister Serik Zhumangarin to strengthen oversight of the sector. He noted that for more than 20 years, the state has protected the interests of construction firms by exempting them from paying VAT. However, this government support failed to reduce housing prices, which have skyrocketed.

“In 2022 alone, total tax exemptions for construction companies amounted to 130 billion tenge. In 2001, the average apartment price was 23,600 tenge per square meter. By 2023, it had reached 494,000 tenge—a 21-fold increase,” Bazarbek stated.

The MP argued that many developers exploited these VAT exemptions for personal gain—some landed on Forbes lists, others funneled capital abroad, and several misled equity holders. He expressed support for ending VAT exemptions for the sector by 2026 but questioned how the government would monitor price manipulation by construction companies.

“We previously exempted them from VAT, but now they might respond by inflating prices, creating a new problem. First, we have a population misled for over 30 years. Second, ordinary citizens still cannot afford housing,” Bazarbek added.

President Kassym-Jomart Tokayev has previously emphasized the need to attract foreign investment into Kazakhstan’s geological exploration sector. In line with this, the government plans to permit deductions for exploration-related expenses—both under current contracts and activities beyond them.

“To support the development of low-profitability areas of new mineral deposits, a zero-rate mineral extraction tax is proposed for up to five years,” Minister Zhumangarin said. “Additional tax preferences will be introduced for the processing of solid minerals. An alternative subsoil use tax will also be implemented for depleted oil fields.”

However, Zhumangarin made it clear that revenue saved through tax exemptions will not remain with subsoil users. Instead, dividend payments will be restricted. The funds are to be reinvested in production and regional development, including infrastructure improvement, workforce training, and scientific research support.

Special Tax Regimes: A Simplified Approach

Minister of National Economy Serik Zhumangarin has announced significant reforms to Kazakhstan’s special tax regimes. This area has emerged as one of the most heavily debated issues in the draft Tax Code. According to Zhumangarin, the number of existing special tax regimes will be reduced from seven to just three:

• A new preferential regime for self-employed individuals;
• A simplified declaration-based special tax regime;
• A special tax regime for peasant and farming households.

In addition to this simplification, the government is proposing the introduction of a so-called "luxury tax." This would increase the property tax rate for real estate worth more than 450 million tenge. Excise taxes will also be introduced on passenger vehicles valued over 75 million tenge, as well as on luxury yachts and aircraft. To promote fairness, a 10% excise is proposed for premium alcoholic beverages and cigars.

A new “service model” of tax administration will also be implemented. The focus will shift away from punitive enforcement and towards comprehensive fiscal support from business registration to closure. Tax reporting requirements will be reduced by 30%, and so-called “desk audits” will move from a penalty-focused approach to one centered on identifying inconsistencies and issuing warnings.

“The way we enforce the collection of tax debts will also change,” said Zhumangarin. “Importantly, small debts will no longer justify restrictions on the entirety of a business’s operations.”

He further elaborated on the revamped special tax regime for small and medium-sized businesses. Now called the simplified declaration-based special tax regime, it retains the current income threshold of 600,000 monthly calculation indices (MCI). Restrictions on the number of employees will be removed, and the tax rate will remain at 4%, though local councils (maslikhats) may reduce it by up to 50%.

The government proposes that this regime be restricted to specific service sectors, with a key condition being that it applies only to B2C (business-to-consumer) transactions. B2B operations will only be permitted within the general taxation regime. Moreover, if a taxpayer under the general regime purchases goods or services from a business under the special regime, they will not be able to deduct those expenses. The government will regulate which types of services qualify for the simplified regime.

“So neighborhood shops, barbershops, and other service providers working directly with the public will meet these conditions and will not be liable for VAT. They have nothing to worry about,” Zhumangarin assured.

Introduction of Progressive Tax Rates: A Step Towards Equity

Economist Aybar Olzhaev noted that the current version of the tax code draft is significantly different from the one initially presented to Parliament. In his view, lowering the VAT registration threshold will serve as a barrier against large businesses splitting operations into smaller units to exploit tax exemptions.

«The government has proposed a VAT system with rates of 0%, 10%, and 16%. Sectors of social significance, such as food, will be fully exempt from VAT. In the healthcare sector, two VAT rates will be applied: for medications listed by the government, VAT will be exempt, while other medications will be taxed at a rate of 10%. All other businesses will be required to pay a 16% VAT. There have been concerns that increasing VAT to 16% will lead to more shadow businesses. However, the situation should work out differently. Let me explain.

First, under the new tax code, a special tax regime will be introduced. Any entrepreneur with an income of less than 600 MRP (monthly calculation index) will pay taxes under this regime. Small businesses, such as stores and bakeries, will benefit from this exemption and will not pay VAT. Second, tax exemptions that were previously granted to certain sectors, such as construction, will be removed. Minister Serik Jumangarin states that this step will generate an income of 1.3 trillion tenge. As you may recall, companies like BI Group and Bazis were previously found not to have paid significant taxes to the government. Now, these large construction companies will pay more taxes.

The third reason stems from the fact that many businesses have split into multiple entities to avoid paying taxes. As a result, they either pay no taxes or benefit from reduced tax rates. Under the new tax code, all businesses will pay the same tax rate, regardless of their size. Therefore, even if a business is divided into smaller entities, they will no longer avoid taxes. This will lead to business growth. VAT has been a concern for the public, but the current proposal seems to offer a compromise», explains Aybar Olzhaev.

Discussions on implementing a luxury tax in Kazakhstan have been ongoing for several years. This is a practice already established in many countries. The new tax code includes the introduction of such a tax. According to Minister Serik Jumangarin, one of the significant initiatives is the introduction of a progressive personal income tax rate.

"For employees with annual incomes exceeding 8,500 times the monthly calculation index, a higher tax rate of 15% will be applied. This will create an additional tax mechanism for high earners. Corporate income tax will be imposed on income from state securities at a rate of 10%, whereas these incomes are currently exempt from taxes.

Additionally, tax will be imposed on income derived from securities issued by quasi-governmental sector entities. However, to support the real sector of the economy and attract investments for infrastructure projects, income from securities issued by the Baiterek National Managing Holding will be exempt from tax until 2030. This will enable an annual investment of 10 trillion tenge into the economy," says Serik Jumangarin.

Experiences from Around the World

Progressive taxation based on income has been a long-established practice in many foreign countries. Progressive taxation is a system in which the rate of tax increases as the taxable income increases. This tax model is designed to reduce income inequality by ensuring that individuals with higher incomes contribute a larger share of their earnings toward public services, infrastructure, and welfare programs. Over the years, progressive tax systems have been implemented in numerous countries around the world, with varying degrees of success. In this article, we will explore progressive tax systems in various nations, how they function, and their impact on both the economy and society.

The United States has one of the most well-known progressive tax systems in the world. The U.S. federal income tax is designed so that as an individual's income increases, the percentage of income paid in taxes also increases. The system consists of multiple tax brackets, ranging from 10% to 37%, depending on an individual's income.

In addition to federal taxes, state and local taxes also apply, and they may follow a flat or progressive structure, depending on the state. The progressive system in the U.S. is further supported by deductions, exemptions, and credits, which help lower the tax burden on lower-income individuals and families. However, despite the progressive nature of the federal income tax, the U.S. tax code is often criticized for benefiting wealthier individuals due to loopholes, tax breaks, and other mechanisms that allow high earners to reduce their taxable income.

The U.S. has seen a broad debate over tax fairness, especially regarding the wealthiest individuals and corporations, with calls for higher taxes on high earners and increased scrutiny of the "wealthy class" who manage to evade taxes through legal means, such as tax havens or deductions.

Germany's progressive tax system is structured similarly to that of the United States, but with a stronger emphasis on social benefits, such as healthcare, education, and pensions. The German tax system includes progressive rates for individual income tax, ranging from 0% for the lowest income earners to 45% for the wealthiest individuals.

What sets Germany apart is the integration of taxes with social security contributions. Employees and employers alike contribute to Germany's social security system, which covers healthcare, unemployment insurance, and pensions. This "pay-as-you-go" system ensures that those who contribute more (typically those with higher incomes) receive more in social benefits, thus promoting social equity.

In Germany, tax rates and social contributions are structured in a way that supports its highly developed welfare state. This system is often praised for creating a strong safety net for its citizens and reducing poverty, but it also generates significant public debate about the fairness of the tax burden on middle-income families, particularly in a country where income inequality is slowly increasing.

Sweden is often hailed as one of the best examples of progressive taxation in the world. The country has a highly progressive income tax system with rates that can reach up to 60%, making it one of the highest tax rates in the world. However, this high tax burden is paired with generous social benefits, including universal healthcare, free education, and extensive social welfare programs.

Sweden’s taxation system is designed to ensure that the wealthiest individuals contribute a significant portion of their income to fund the public services that benefit everyone. The high taxes are justified by the government’s commitment to providing a high standard of living for all citizens, regardless of their income level.

One of the key features of Sweden’s progressive tax system is its emphasis on fairness and equality. The taxes paid by high earners help fund public services that promote economic equality, such as public transportation, affordable housing, and accessible healthcare. The country’s tax structure is widely seen as one of the primary reasons behind its low poverty rates and high quality of life.

The United Kingdom also employs a progressive tax system, with a strong emphasis on wealth redistribution. The income tax rates in the U.K. range from 20% to 45%, with higher earners contributing a greater share of their income to the government.

The U.K. tax system is further complemented by national insurance contributions, which are used to fund the National Health Service (NHS) and other social programs. The government also uses its tax system to reduce poverty and inequality by redistributing wealth through social benefits such as child benefits, housing benefits, and unemployment support.

In recent years, there has been significant public debate over the need to reform the U.K.'s progressive tax system, particularly concerning wealth taxes and the taxation of high-net-worth individuals. Critics argue that the wealthy are not contributing enough, while others claim that high taxes may discourage investment and entrepreneurship.

France’s progressive tax system is another example of a robust welfare state where high taxes on income fund extensive social benefits. The French tax system includes both a progressive income tax and a variety of other taxes on capital, wealth, and social contributions. The French income tax rates range from 0% to 45%, with several brackets in between.

In addition to income taxes, France imposes taxes on capital gains, real estate, and inheritance, which contribute to the government’s ability to finance public services. The French system also includes wealth taxes, such as the "impôt de solidarité sur la fortune" (ISF), which is a tax on the net wealth of individuals above a certain threshold.

France’s progressive tax system is designed to reduce inequality and fund a comprehensive social safety net that includes universal healthcare, education, and unemployment insurance. The taxes collected from higher earners are used to support public services that benefit all citizens, including the most vulnerable.

Canada’s tax system is progressive, with income tax rates that range from 15% to 33% for individuals. Provincial and territorial governments in Canada also impose income taxes, and these rates vary depending on the jurisdiction. Overall, Canada's progressive tax system aims to reduce inequality by ensuring that those who earn more pay a larger percentage of their income in taxes.

In addition to income taxes, Canada has a system of social programs that provide universal healthcare, public pensions, and unemployment benefits. These programs are funded through taxation, and the government’s focus is on ensuring that all Canadians have access to basic needs, regardless of their income level.

Canada's progressive tax system is considered fair by many because it provides essential public services without placing an undue burden on lower-income individuals. However, some critics argue that the country’s tax system could be made more progressive by introducing higher tax rates for the wealthiest Canadians.

Australia has a progressive tax system, with income tax rates ranging from 0% to 45%. The system is designed to ensure that those who earn more pay a higher percentage of their income in taxes. In addition to income taxes, Australians pay a goods and services tax (GST) of 10% on most goods and services.

Australia’s tax system is complemented by a robust welfare system that includes universal healthcare (Medicare), pensions, and unemployment benefits. These social programs are funded through taxes and contribute to reducing income inequality.

One of the unique aspects of Australia’s progressive tax system is its use of tax rebates and offsets to provide additional financial relief to low- and middle-income earners. This approach helps to alleviate the burden of taxes on those who need it most.

The Future of Kazakhstan’s Tax Reform

Progressive tax systems are implemented in many countries around the world, each with its own approach to ensuring fairness and reducing inequality. While the specifics of these systems vary, they all share a common goal: to make sure that higher earners contribute a larger share of their income to support public services and reduce economic disparities.

The benefits of progressive taxation include reduced income inequality, greater social mobility, and the ability to fund social programs that benefit the public as a whole. However, these systems also face challenges, such as the potential for tax evasion, the burden on high-income earners, and the need to strike a balance between funding public services and encouraging economic growth.

As countries continue to adapt their tax systems to meet the needs of their citizens, progressive taxation remains a key tool in promoting economic fairness and reducing inequality across the globe.

The proposed progressive tax system in Kazakhstan is certainly a step forward, though it is not without its flaws. Experts agree that there are areas for further refinement. However, the government’s move to implement such a system marks a significant shift towards a more equitable taxation model.

Under the new tax code, the government is also introducing excise duties on non-alcoholic energy drinks in an effort to reduce the consumption of harmful beverages. In addition, changes to the registration process for legal entities are being proposed as part of a broader crackdown on business fragmentation.

According to Serik Zhumangarin, the Minister of National Economy, companies whose founders or managers have been held accountable for serious tax violations will no longer be able to register new legal entities. To improve tax administration and ensure that tax authorities target only non-compliant businesses, it is proposed that comprehensive tax audits be conducted only if an enterprise’s tax burden is lower than the sector and region's average. This measure aims to direct the tax authorities' attention to high-risk cases while avoiding unnecessary inspections.

The goal of these changes is clear: to target businesses that hide income and ensure that tax collection is fairer. “The rich should pay more,” Zhumangarin said, emphasizing the need for a tax system that addresses inequality. By eliminating loopholes for businesses to evade taxes or pay lower rates, the government hopes to create a more just system where everyone, regardless of the size of their business, pays their fair share.

The broader implications of these reforms also include an expected boost to national revenue. The government has estimated that the changes could bring in an additional 4 to 5 trillion tenge annually. This would be a positive development, particularly because the government currently relies heavily on transfers from the National Fund to cover budget gaps. In recent years, the government has been able to access record amounts from the fund, but this reliance has prevented the Fund from growing at a desired rate. If the government is successful in making the budget more self-sustaining and reducing its dependence on the National Fund, it would be a significant achievement for Kazakhstan's fiscal health.

However, there are concerns that these reforms could have an impact on inflation. The government acknowledges that while inflationary pressures may arise, they believe the effects will be short-lived, lasting no more than a year. As the new system takes hold and businesses adapt, it is expected that any inflationary impact will subside.

In conclusion, while the proposed tax reforms may not be perfect, they represent a step towards a fairer, more transparent tax system in Kazakhstan. The government’s actions to close loopholes, increase compliance, and ensure that high-income individuals and large businesses contribute their fair share of taxes are commendable. As the reform process continues, further adjustments may be needed, but the foundations for a more equitable tax system have been laid.

Subscribe to our Telegram channel and be the first to know the news!