Azerbaijan, Baku / corr Trend I.Khalilova / The Azerbaijani Taxes Ministry is considering opportunities for cutting Value Added Tax (VAT) rates as part of injecting amendments to the Tax Code in 2008.
The Ministry announced on 31 July that presently, VAT comprises 18% and there are proposals to cut them to 17.5%. Since the very beginning a strategy on tax bodies implied cut in VAT rates at two stages:
- increase of tax discipline and application of VAT account in the banking system from 2007
- cut in tax rates
However, the application of VAT-accounts was taken out of draft changes to the Tax Code, whereas the Ministry was committed to develop proposals on improvement of tax administration.
Under measures on strengthening of administration system on VAT in 2007 the financial sanctions with respect to cash accounts were toughened.
Although at the beginning of the year Fazil Mammadov, the Azerbaijani Taxes Minister, stated on the possibility of reducing rates in two types of taxes next year. Along with the VAT, he also reminded of income tax, whilst no discussions are carried out currently to reconsider taxes on this type of taxes.
Since 2006 income tax rates has comprised 22% as compared to 24% applied in 2004 and 2005.
Previous changes were introduced in 2004, when the tax rates were 25%. The Government planned to introduce cut in income tax rate to 20% (by 5%) over 5 years. If to take into consideration that cut was not introduced in 2007 and there is no expectation for 2008, in 2009 it will be reduced to the target (20%).