On September 1, 2024, President Kassym-Jomart Tokayev of Kazakhstan delivered his annual address to the nation, focusing on key economic and financial reforms that are poised to shape the future of the country. The speech covered a wide range of topics relevant to the business community, the banking sector, and the tax code. Below are the main points from his address in these areas:
Economic Diversification and Industrial Growth
President Tokayev reiterated the need to diversify Kazakhstan’s economy, moving away from heavy reliance on natural resources, particularly oil and gas. He emphasized fostering growth in sectors such as manufacturing, agriculture, and technology. The government plans to implement policies that encourage the development of value-added industries and promote innovation across various sectors. For businesses, this signals a shift towards creating a more resilient and competitive economy that is less vulnerable to global commodity price fluctuations.
Banking Sector Reforms
International experts consider Kazakh banks to be among the most profitable among resource-rich countries. Therefore, it is also a question of fair taxation of this sector. Taxes paid by banks should be proportional to the dividends of their shareholders. This approach looks particularly logical against the background of state aid to banks. It is also important to create a stable regulatory environment for the circulation of digital assets and the safe introduction of innovations in the banking sector. We need a new law on banks that meets the urgent tasks of stimulating economic activity and further dynamic development of the fintech sector. The current law is almost 30 years old and was adopted in completely different realities.
Support for Small and Medium Enterprises (SMEs)
Recognizing the role of SMEs in driving economic growth and employment, Tokayev announced new initiatives to support these businesses. He proposed easier access to credit and financing for SMEs, with a particular focus on reducing interest rates and simplifying application processes. The government aims to create a more conducive environment for entrepreneurship by cutting red tape and providing tax incentives. Additionally, Tokayev stressed the importance of digitalization for SMEs, urging them to adopt new technologies to enhance their competitiveness and market reach.
Tax Code Reforms
It is obvious that public finance alone is not enough to ensure dynamic economic growth. It is necessary to create favorable conditions for increasing business activity by attracting private investment into the economy. This requires, first of all, a stable tax policy stimulating qualitative development and responsible business behavior.
The new Tax Code is intended to reboot the existing system. The Code should be aimed at building a fundamentally new tax administration based on trust to taxpayers. It is extremely important to simplify the Code, to make its provisions understandable for all economically active citizens in order to eliminate the possibility of different interpretations of the norms. At the same time, the implementation of the updated Tax Code has been postponed until 2026.
It is necessary to optimize tax regimes without worsening the existing favorable conditions for entrepreneurs. The introduction of a retail tax can be cited as an example. Businesses believed in this norm, began to come out of the shadows, and the fragmentation decreased. But entrepreneurs who work mainly with the population should fall under this regime.
Full disclosure of the potential of consumer services and trade can give the necessary rapid effect in terms of economic growth, increase in tax revenues and employment.
In order to achieve the success of fiscal reform, it is necessary to carry out a total digitalization of administration. To mitigate corruption risks and ensure transparency, the transfer of tax processes to electronic format should be accelerated. It is desirable to adapt all tax policies to changing fiscal conditions, including revision of tax rates.
Tax incentives for production
Increasing the efficiency of tax incentives has become an urgent task. Tax reporting should be provided on all incentives. It is necessary to retain those that really stimulate business. For example, it is possible to provide preferences for investors aimed at the development of production. We are talking about a one-time deduction for the construction, acquisition, modernization, reconstruction of assets. It is important to provide benefits for exporters of highly processed products; they should receive more support than any other business.
The President also noted that it is necessary to strive for a complete abandonment of tax audits according to the plan. For this purpose, the risk management system will have to be improved.
Revising the taxation of cryptocurrency exchanges
It is necessary to continue work on improving the regulatory framework for digital assets and mining, further development of crypto exchanges. We have entrepreneurs who consume a large amount of electricity to the detriment of the economy, but do not pay taxes in the proper amount. They need to be dealt with.
Conclusion
President Tokayev’s address on September 1, 2024, laid out an ambitious roadmap for Kazakhstan’s economic future, with significant implications for businesses, the banking sector, and the tax system. The proposed reforms are designed to foster a more diversified, innovative, and sustainable economy, with a strong emphasis on improving the business environment, enhancing financial stability, and ensuring a fair tax system. As these reforms take shape, they will likely create new opportunities and challenges for all stakeholders involved, setting the stage for Kazakhstan’s continued growth and development in the global economy.
Article is prepared by Director of FChain Kazakhstan
Ekaterina Kassumova
04.09.2024
