"Efforts are lacking": auditors comment on the fight against the shadow economy in Kazakhstan.

The Supreme Audit Chamber has completed a state audit assessing the effectiveness of the government's policies aimed at combating the shadow economy, reviewing the findings, reports NUR.KZ, citing the Chamber.

https://www.nur.kz/politics/kazakhstan/2213532-net-celnoy-sistemy-v-vap-vyskazalis-o-borbe-s-tenevoy-ekonomikoy-v-kazahstane/2025-01-21 08:27:50

They were discussed at a meeting chaired by the head of the chamber, Alikhan Smailov.

The meeting also included the Deputy Chairman of the Financial Monitoring Agency, Kairat Bizhanov, Vice Minister of Finance, Yerzhan Birzhanov, Chairman of the State Revenue Committee, Zhandos Duysenbiev, and the head of the National Statistics Bureau, Maksat Turlubaev.

The agency noted that the shadow economy negatively impacts the country's development by reducing fair competition, hindering the growth of small and medium-sized businesses, and decreasing revenues to the state budget.

It is emphasized that Kazakhstan aims to reduce the share of the shadow economy in the gross domestic product to 15%, which aligns with the levels of developed OECD countries. In recent years, there has been a consistent trend of decreasing this indicator—from 28.8% in 2017 to 17.5% in 2023.

Judging by the results of the audit conducted, there are several significant shortcomings that hinder the effectiveness of government policies in this area.

"Currently, there is no government body responsible for forming a unified policy to combat the shadow economy and coordinating other agencies. Such functions were initially assigned to the Financial Monitoring Agency. However, they were later excluded from the FM Agency's regulations," the Accounts Chamber noted.

Auditors also found that each government agency takes measures within its competence, but there is no cohesive system with a clear distribution of functions. It is claimed that not all sectors are covered by comprehensive plans to combat the shadow economy, and some measures appear to be formal.

"There is no coordinated work among government agencies. Comprehensive plans are not sufficiently focused on reducing the shadow economy. The measures are poorly developed, and some are effectively removed from control without execution. There is no assessment of their impact on reducing the shadow economy. At the same time, the audit revealed that there is a significant volume of hidden turnover in the country," stated the Chairman of the Accounts Chamber, Alikhan Smailov, during the meeting.

The auditors also raised questions about the methodologies used to define the unobserved economy.

For example, the coefficient of cashless turnover is utilized. This ratio compares cashless payments by individuals for goods and services to GDP. However, the share of such payments is increasing every year, which automatically "lowers" the level of the shadow economy. Therefore, the validity of this coefficient is in doubt.

Additionally, one category of calculations does not account for the classifiers "Real Estate Transactions," which includes renting housing, and "Arts, Entertainment, and Recreation."

In another category, data on small trading enterprises began to be collected not comprehensively but through sampling methods, which also led to a reduction in the coverage of the unobserved economy.

Based on the conducted analysis, the state audit identified several high-risk areas and sectors susceptible to shadow turnover.

For instance, according to the State Revenue Committee, citizens from three Central Asian countries earned 136 billion tenge in Kazakhstan over three years. However, according to the National Bank, during the same period, they transferred a total of 1 trillion tenge back home. This indicates a high probability of producing "shadow" goods or services.

In total, the audit results reveal:

It is noted that the Supreme Audit Chamber has developed necessary recommendations and directives for all problematic issues. These will help eliminate existing shortcomings and achieve the set goals in the fight against the shadow economy.

According to the methodology for assessing the unobserved economy, the shadow economy (shadow turnover) refers to activities where producers prefer not to declare part or all of their income to evade taxes, as well as violate labor legislation or immigration regulations by engaging in unaccounted labor or choosing to operate without official permission to avoid lengthy and costly bureaucratic procedures.