Set of measures to improve fiscal and tax system presented by Government
During the enlarged Government session chaired by Head of State Kassym-Jomart Tokayev, Prime Minister Olzhas Bektenov voiced a number of proposals aimed at improving the fiscal system and economic growth, El.kz cites primeminister.kz.
Head of the Government noted that despite some positive results, the current dynamics of economic growth is insufficient. To fully realise the country's industrial potential and increase the number of promising projects it is necessary to form a solid investment capital. However, this is hindered by the insufficient volume of the "development budget": in developed countries it reaches 25 per cent of all government expenditures, while in Kazakhstan it is 8 per cent. Today, only 2 trillion of the nearly 26 trillion tenge national budget is spent on development. The rest is the current budget, a significant part of which is social spending.
As a result, spheres that are the basis of economic development remain underfunded: electricity and heat energy, water management, gas transport system, roads, engineering networks and infrastructure. Development institutions are not provided with sufficient liquidity. Such conditions are difficult to reliably ensure high dynamics of GDP growth.
In this regard, it is necessary to implement a set of measures to improve the fiscal system. The current tax system not only does not provide the state with the required volume of investment, but is also unfair to entrepreneurs. The main tax burden falls on the labour remuneration fund, i.e. on the cost of production. Even before the goods hit the shelves, the entrepreneur has to pay most of the taxes.
To change this situation, the Government is in favour of redistributing taxes from wages to sales. For this purpose it is necessary to increase the VAT rate, at the same time reducing the social tax and mandatory pension payments of the employer. This will increase the competitiveness of domestic enterprises and create the necessary financial reserves for them. Reducing the burden on the payroll will allow businesses to increase employee salaries. Additional tax revenues will be used to stimulate economic growth, advance infrastructure development, and support promising business projects in priority sectors. The resources of the National Fund will be requested exclusively for the construction of large infrastructure projects.
In parallel, work will be done to improve the efficiency of public spending and strengthen budgetary discipline.
Attention is focused on the permanent growth of subsidy expenditures in all sectors without taking into account their real effect and with weak control on the part of government agencies. Receiving subsidies has become part of the business model of individual companies. Over the last 3 years, 770 projects have seen a rise in cost estimates totalling 2.2 trillion tenge. However, in addition to the objective increase in cost, there are also controversial issues.
More than half of the expenditures of the republican and local budgets, more than 18 trillion tenge, are allocated to the social sphere. It is emphasised that the efficiency of these expenditures raises big questions. Nine central and all local executive bodies are administrators of social expenditures, which entails fragmentation and insufficient control over expenditures.
Using digital tools, strengthening of control over budget expenditures for social purposes has been initiated. A transparent digital mechanism for financing kindergartens has been introduced in pilot mode in Taraz, Shymkent, Turkestan and Uralsk. By eliminating additions in four cities alone, this saves more than 20 billion tenge per year. This experience is already being implemented in the capital city, and it will be scaled nationwide by the end of this year.
The Social Purse is also becoming a tool for strengthening the targeting of state support. It has been used to pay for children's meals and medicines for those in need. Labelling of free medicines has been completed in order to strengthen control.
A digital tenge with the function of colouring money has been introduced on a pilot basis, which makes it possible to trace the entire chain of expenditures to the final recipient. Non-primary expenditures of the state apparatus have been reduced, including current expenses, image events and travel payments totalling 410 billion tenge.
"Work on improving the efficiency of public spending will be strengthened according to the principle of "budget expenditures should be primarily for economic development, social support - only to those in real need". Economic growth should be accompanied by advanced investment in infrastructure.However, excessive state price regulation in the most capital-intensive sectors of the economy hampers this task and reduces investment potential. The government has started a gradual liberalisation of prices for fuel and lubricants and gas, as well as tariffs in the housing and utilities sector and railway transportation. A smooth transition to market pricing will make it possible to attract the necessary investments in these areas and get rid of the risks of a shortage of fuels and lubricants. I would like to emphasise that we will not allow a sharp jump in prices. The adoption of these measures will ensure the necessary dynamics of economic growth and structural changes in the economy," Olzhas Bektenov concluded.
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