Azerbaijan, Baku, 20 June / Trend / The drop in the profit tax and VAT in Azerbaijan which is expected to take place in summer of 2010, can give a powerful impetus to the development of the medium and small business which will enable to alleviate poverty by creating new jobs. Medium and small businesses serve as a basis for all developed economies and they are responsible for the development of the labor market and employment and rise in the life standards.
Azerbaijan has a population of 8.5mln. Though there have been changes for the better in the poverty rate, 1.3mln people still live in poverty.
The project on drop in the tax rates from the current 22% to 20% and VAT - from 18% to 17%, introduced to the parliament by the Ministry of Finance in early May has been delayed until 2010.
On 1 January 2006, the profit tax dropped from 24% to 22% in Azerbaijan. Meanwhile, the number of the juridical persons increased by 6% and the poverty rate dropped by 9 points which is not a small indicator. Thus, as a result of 2006, the poverty dropped from 29% to 20% and in 2007 from 20% to 16%. The number entrepreneurs increased by 6.8% during whole of 2006 and totaled to 339,147 people.
It can be supposed that the drop from 22% to 20% in the profit tax can cause 7% drop in poverty and the number of entrepreneurs can exceed 400,000 in Azerbaijan.
Taxes are the balance between the economic growth and social security. The drop in the taxes causes mechanisms of the latter to work. Moreover, the tax reform contributes to the rise in the number of tax payers which is so small in Azerbaijan.
Leyla Abdullayeva, expert of Trend analytical center.
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