Tax amnesty expected in azerbaijan
Last year the Azerbaijani Taxes Ministry announced that in 2007 the Government will apply a system of income and expenses declaration in the country for the population of Azerbaijan. It was announced that this system was to be applied with respect to some fields in 2006. At the same time, a mechanism making the state employees eligible to produce financial declarations was made public. However, nothing of the kind occurred in 2006 and it makes suspicious all promises scheduled for this year.
Even then Trend's analytical group made a conclusion that efficiency of the application of a declaration system for all citizens of Azerbaijan seems very suspicious. Of course, it is very good idea and experiences in many countries. However, it can be deadly born in Azerbaijan. Therefore, it is necessary to pressure on Azerbaijani citizen's thoughts and to strengthen a sense of answerability and then attract to fighting with evasion from tax payment. It would not be so easy for an Azerbaijani citizen, who has lived under threat of 'dispossession of kulak' for many years, to reveal true amount of incomes. Naming the valuable thinks purchased at own money as presents from 'rich relatives' is so peculiar to our mentality.
Thus, the Taxes Ministry states that the Government should take stimulating steps to make people to declare their incomes. Application of tax amnesty could be one of these steps, without which it would be impossible to achieve full declaration of physical ad legal persons' incomes.
What is tax amnesty is? The world practice specifies that tax amnesty is the release of a person accused of any tax violation from administrative, financial and criminal answerability in accordance with the legislation, on the basis of an Act on Amnesty, adopted by the supreme bodies of the Government. The Act on Amnesty is applied on all persons, who committed crimes until the enactment of these acts and meets the requirements set in this.
This practice is peculiar to many countries. Over the past few years, the application of Tax Amnesty enabled to return big funds to the public budget in may European countries. The classical sample of the successful amnesty is considered the tax amnesty in Ireland in 1988. The finances collected at that time amounted to 2.5% of the GDP of this country.
As a result of amnesty in Kazakhstan in 2001, nearly $480.2 mln were returned to the economy of the country.
Yet there are not forecasts for incomes in this line. It is only known that the tax declarations will exclude underage children, disabled layers of population, as well as military people, those who are under investigation, have been arrested and are in captivity abroad.
According to the representatives of the Taxes Ministry of Azerbaijan, the transition to the common declaration system in Azerbaijan may bring not only to legalization of the revenues, but also expansion of the taxable base and significant increase of the budget incomes.
Firstly a relevant political decision of the Head of the Country is needed to apply the tax amnesty in Azerbaijan, as well as there is a necessity to adopt a number of relevant laws. It may be a law equal to the Russian law. In addition, imperfection of the tax legislation does not allow to fully implement the principle of fair taxation. In order to hold valuable tax amnesty, it needs to alter Tax and Civil Codes to ensure that the capitals do not flow into black economy in the future.
On 15 August 2005 the Azerbaijan President Ilham Aliyev signed a decree on ratification of the law on Rules for producing of financial declarations by state employees, which was earlier adopted by the parliament. In accordance with the document, the senior ranking state and government employees are to produce to the State Anti-Corruption Commission a declaration on incomes and property every year from 1 to 30 January. These are the President, Speaker of the Parliament and his deputies, Prime Minister and his deputies, head of the Accountancy Chamber the Construction Court, the Supreme Court and his deputies, Ombudsman, Heads of President's Executive Power, Parliament, Chairman and Managing Board of the national Bank of Azerbaijan. The Taxes Ministry has developed rules regulating the order of producing the declarations and put it for approval to the Cabinet of Ministers. The Taxes Ministry explains the delay in this process with the transition of senior officials to a declarative system is the initial stage for transition of all people to a system of declaration and basic arrangements are required in this respect.
Let's return to tax amnesty and clarify whom does this innovation actually benefit? First of all, the tax amnesty is used by pleasure by people who have not legalized timely their incomes from different profit operations, as well as state employees that obtained an opportunity to legalize the earnings. Furthermore, this order will be actual for people, who give on rent apartments and have other income sources I the sphere of 'shadow economy', as well as people who are currently passing investigation for non-payment of taxes. No less actual issue is linked with people who receive salaries in 'envelopes' and decide to legalize their incomes, as well as employers who decline from payment of taxes in this way. at the same tie, tax amnesty will not be a roof for incomes, obtained in criminal way or violation of financial, or customs other legislation.
It is necessary to note that as long as full confidence has not been established between taxpayers and State, the amnesty will not yield significant results, but even will assist the flow-out of the capital. Many countries refuse to apply tax amnesty due to the banal fright to get into black list.
As a result of mass declination from payment of taxes the government loses big amount of funds liable for obligatory payment. Moreover, the government sees mass concealment of private incomes and property from taxation, mass outflow of capital, which different estimation urge to fluctuate between $850mln and $3bln. The Azerbaijani Finance Ministry announced that over the past year, losses only from one value added tax (VAT) are valued at hundreds of billions. As the business climate is favorable, as threats and risks for business are low, as the court system is exact and transparent and media is free as it rapidly leads to provision of incomes and expenses of population, as well as in public budge incomes and prevention of inexpedient use of public funds.