The Kazakh government plans to raise VAT and lower the threshold for tax registration.

“Today, out of more than 2.3 million registered taxpayers, only 137.7 thousand business entities are VAT payers. Of these, only 88 thousand actually pay VAT, which is 4% of the total number of taxpayers. One reason for this is the high threshold for VAT registration, set at 78 million tenge. Therefore, we propose to lower the VAT threshold to 15 million tenge first,” stated Serik Zhumangarin.

Currently, 80% of SMEs operate within the threshold of 15 million tenge, leading the government to believe that lowering the VAT registration threshold will not significantly impact most SMEs.

Additionally, it is suggested to reduce the number of OKED codes related to retail tax.

“This regime includes various types of economic activities, some of which do not pertain to the retail sector. In other words, we have given preferences to those who should not have been beneficiaries of the retail tax. Retail involves selling to consumers, typically including trade, hotels, catering, etc. However, in our case, nearly the entire spectrum of business is covered—manufacturing, services, construction and installation works, and others. As a result, a large number of business entities have ceased to be VAT payers,” noted Zhumangarin.

As part of the development of the new Tax Code, an increase in the VAT rate is also being considered.

“We have conducted calculations based on the macroeconomic models of the National Bank. A concrete vision already exists. We will discuss this with experts. We emphasize that this is not just about a mechanical increase in the VAT rate, but rather a set of measures aimed at revitalizing the tax and budget system. Naturally, it would be a mistake to solve the state's problems solely by raising taxes. With the increase in the VAT rate, businesses will inevitably incur additional costs. The state is prepared to compensate for these,” stated the Deputy Prime Minister.

To alleviate the increased tax burden on businesses, the government plans to reduce the labor cost burden.

“We have one of the highest burdens on the labor cost fund. Here lies the biggest problem of our economy. The burden is around 40%, which affects the cost price of goods. What does this lead to? It results in high production costs, making the products themselves uncompetitive,” explained Serik Zhumangarin.

If the VAT rate is increased to the planned level, the government is ready to reduce the labor cost burden by an average of 10% to 30%, by abolishing the social tax and mandatory employer pension contributions.

Zhumangarin noted that the government understands the importance of the social tax for local budgets, as it is a primary source of income for them. In this regard, options for reallocating other types of taxes from the national to local budgets are being explored, the Deputy Prime Minister concluded.