Azerbaijan, Baku, May 25 / Trend , I.Khalilova/
The Azerbaijani presidential administration has sent a bill on amendments and changes to the Tax Code to the parliament, the country's government said on May 25. These amendments will be applied in 2010.
In the latest version of the draft amendments, the item relating to changes in income tax rates was corrected. The version suggests cutting a maximum rate of income tax for individual entrepreneurs by 20 percent, and employees - up to 30 percent. Today, a single maximum rate of income tax is 35 percent in the country. The Ministry of Finance proposed to reduce this to 20 percent for all. However, regarding that most of the foreigners fall into the category of tax payers of personal income at the maximum rate, the government found it expedient to reduce by five percent for the hired employees.
Change of rate on other taxes remained at a previous level. The Taxes Ministry suggests in its alternative version to cut tax rates by 2 percent - up to 20 percent and value added tax - by 1 percent - up to 17 percent, which has not been supported by the Finance Ministry.
The Finance Ministry believes the budget will lose 140 million manat by reducing the VAT rate to 1 percent, while the reduction of income tax rates, even at 15 per cent will cause losses worth 50 million manat. The budget will lose from reducing the VAT rate, since these taxes' base is broader than income tax, which mainly foreign companies.
The process of developing draft amendments to the Tax Code was delayed because of differences in the finance and tax ministries' proposals. The Finance Ministry supported to cut rates on direct taxes - besides the profit tax, it proposed to cut a maximum rate of income tax. But the Taxes Ministry's draft amendments to tax legislation do not change the income tax rate.
A new version of the Tax Code will be applied in 2010. For the first time this year, amendments to tax legislation will be adopted separately from the public budget in the first half. This will facilitate the review and approval of budget forecasts and enable taxpayers in advance to familiarize with the changes in tax legislation.
Recent changes in tax rates occurred in Azerbaijan in 2006, and rates of profit tax were cut from 24 percent to 22 percent. Moreover, individuals' income up to 2,000 manat (earlier over 600 manat) is subjected to withholding tax at a rate of 14 percent, and more than 280 manat + 2000 manats taxation is made at a rate of 35 percent in 2008.
This plank of annual income, which is subject to a rate of 14 percent, is 24,000 manats, and on 35 percent - over 3,360 manats + 24,000 manats.
Budget Revenue approved at the level of 12.177 trillion manat (including centralized revenues - 11.698 trillion manat, local - 0.479 billion manat), or 27.9 percent of GDP, expenses - 12.355 trillion manat (centralized expenditures - 11.095 trillion manat, local - 1.259 billion manats), or 28.3 percent of GDP.
The Ministry of Taxes will provide 5.75 billion manats budget revenue (with an increase to 6.9 percent compared to 2008 year). Tax revenues from the oil sector are planned in the amount of 2.68 billion manat (decrease compared to 2008 year by 7.6 percent), non-oil - 3.07 billion manat (at the growth of 23.8 percent).
On May 25, the official exchange rate is 0.8036 manat to $1.
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