All attention to development of voluntary tax

Analysis Materials 26 April 2011 17:41 (UTC +04:00)

Steady growth of tax proceeds has been observed in Azerbaijan over the recent years. In 2011, Azerbaijani Public budget's tax proceeds from the non-oil sector will make up 2.740 billion manat or 62 percent of total tax proceeds from the Tax Ministry. On the whole, revenues of Azerbaijan's 2011 Public budget from the Tax Ministry are forecasted as 4.420 billion manat.

To provide this forecast, the Ministry has approved a plan of works, which includes a set of measures to be implemented for the fulfillment of the Tax Ministry's 2011 tasks. It is envisioned to strengthen fiscal and administrative instruments to get fulfillment of the plan of transfers to the state budget, including improvement of tax legal provisions and administration, of the quality of services to taxpayers, and overall development of the tax system.

The past five years can generally be considered a period of transition of Azerbaijan's tax system to a new stage of development. Several important projects on key strategic directions were implemented under the State Tax Administration Improvement Program in 2005-2007.

One of the priority directions of work of the tax authorities is control work. Substantial progress in the development of the voluntary tax payment system and in the provision of reliable protection of taxpayers' rights has already been achieved. The efficiency of struggle with tax frauds and cases of tax deviation has been increased; a considerable success has been achieved in the formation of tax administration as a low-risk system.

The 2010 operative control measures revealed that 3,109 taxpayers and them-owned facilities involved 4,741 physical persons in work with no labor agreement concluded; those who committed the violations were fined a total of 4.86 million manat. The operative control measures at 27,622 trading, catering and servicing facilities resulted in administrative fines and financial sanctions for the total amount of 10.78 million manat.

There were complained 538 criminal cases on the corresponding Articles of the Penal Code of the Azerbaijan Republic in connection with the infringements of tax legal provisions; 21 persons who had been searched for due to tax deviation and tax crimes were detained. Two hundred persons who had declined from the investigation were seized; the whereabouts of 233 persons was identified and an action was brought against them. Note is that 87 criminal cases were eliminated as 11.375 million manat had been paid to the state budget.

The conducted measures decreased the sum of debt on taxes by 1.6 billion manat against the previous year.

The application of international tax management standards and the establishment of computerized information system in line with modern requirements also contribute to the improvement of the mechanism of forced levy of taxes and prevention of debts on taxes. By the way, experts of the US Department of the Treasury, the International Monetary Fund, and the World Bank have assessed the works on aforesaid directions done by the Tax Ministry of Azerbaijan as a model strategic program for developing countries and CIS states.

Azerbaijan became the first country in the Eastern Europe and CIS applying electronic invoices. The process of electronic turnover of documents in Central European countries has been practiced for about a decade already though EU member states even today continue to adapt common principles to their local peculiarities. Nevertheless, the advantages of electronic documents are evident. According to the research carried out by PricewaterhouseCoopers (PwC) in 2010 among businesses in EU 27 member states, respondents put improvement of business efficiency on the first place, cut of company costs on the second place, acceleration of payment of invoices by counteragents on the third place, and cut of the number of disputes among counteragents on the fourth place.

On the whole, tax systems in the leading Western countries have now reached, probably, peak of their development. Taxes sometimes were higher and more numerous in the past but they have never constituted as powerful, comprehensive structure as they do now. The tax authorities of practically all countries have been armed with powerful computers and keep special services of tax investigations; the taxpayers' side is represented by high-skilled lawyers and accountants who develop special schemes and programs of tax minimization and tax deviation.

The Automated Tax Information System (AVIS) has been operational at the Tax Ministry of Azerbaijan for three years already. As viewed by many specialists, the system made the real revolution in the sphere of tax control and office work and enabled to make a kind of technological turn at practically all links of the tax service.

Owing to the broad opportunities of AVIS, we have been receiving online electronic tax declarations, processing them, and calculating tax deviation risks on either separate taxpayers or specific kinds of economic activity since 2007. It is sufficient to mention that last year alone 99.4 percent of VAT - payers and more than 87% of payers of other taxes presented their declarations in electronic form through Internet-Office created by the Tax Ministry. These indicators impressed even foreign specialists given that IT - technologies in foreign countries were put in use much earlier than in our country.

Apart from the innovation achievements due to the AVIS functional capabilities, the system of "online office work" integrated with the Ministry's internal turnover of documentation has been operational since this year. From now on, everyone who sends a certain document to the Ministry's electronic address has the opportunity to track the document's traffic online, and establish telephone link with the direct performer of his/her appeal.

Moreover, taxpayers can enter into written correspondence between each other through using the capabilities of the system of "online office work". The AVIS has provided the opportunity of electronic audit. This project, which is likely to take 2 years, is expected to begin in the fourth quarter of this year jointly with the tax authority of Denmark, the world's leader in the field of e-audit. On top of all, this saves a lot of time and labor resources required for the conduct of field tax checks, especially at large organizations and business structures.
Technical base and personnel required for the electronic registration of physical persons have already been available and that's why it will become possible to start registering entrepreneurs-physical persons regardless from place of their work through the Internet after relevant changes of the tax legal provisions are made. Changes are expected to occur in the Tax Code to provide the transition to electronic registration of physical persons.

Once the electronic registration of commercial entities is launched in the country, it will become possible to receive the individual identification number by appealing through the Internet. This will contribute to development of the "common window" system and to improvement of Azerbaijan's investment opportunities.