IMF Offers Softening Expenditures on Salaries and Pensions in Azerbaijan by 2011
Azerbaijan, Baku, 2 October / Trend corr. N.Ismayilova / The International Monetary Fund (IMF) recommends the Azerbaijani Government within next ten years to avoid the coincidence of forecasted reduction of incomes from oil to dramatic reduction of direct taxes rates, according to the IMF's report on Functioning and assumed tax system in non oil sector of Azerbaijan.
Currently, taxation of subcontractors, which functions in oil and gas field of the country, is being realized within the framework of the PSA, in another word, on the base of rate of profit tax surpassing rate outside of this field. However, construction work is under completion.
"Considerable increase of earnings on income tax and assignments on obligatory social insurance reflects quick growth of salaries in the public sector and pension at a considerable degree, whilst the taxes rate is not viable in further prospective, the report said. Even before oil production will enter its expected digressive way in 2011, growth of expenditures on social needs on salaries and pensions should be softened."
It is necessary to avoid inflation price spiral of salaries and to maintain financial deficit, excluding oil products, at viable level. Need in more difficult macroeconomic policy will restrict potential growth of direct tax base.
[Profit tax in Azerbaijan amounts to 22% and rate of social insurance25%.]
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