Weekly economic review (May 13-17)

Analysis Materials 21 May 2013 17:01 (UTC +04:00)

Non-cash payments may be exempt from VAT in Azerbaijan

Payments made with the use of credit cards in Azerbaijan may be exempted from value added tax (VAT), the first deputy chairman of the Central Bank of Azerbaijan (CBA) Alim Guliyev said. The VAT rate in Azerbaijan is at 18 per cent. According to him a package of proposals was prepared on behalf of the president of the CBA in conjunction with the relevant ministries and government agencies aimed at increasing the share of non-cash payments in the country.

"This issue is one of the most pressing at the moment. Based on international best practices, we have prepared a package of proposals aimed at the development of cashless payments in Azerbaijan. Primarily, these proposals are aimed at encouraging greater use of non-cash payments. They provide a variety of tax relief measures for the development of appropriate infrastructures including communications in the regions. Specifically, it is expected that e-payments will be exempt from VAT," Guliyev said.

In addition, the proposal also provides for exemptions from customs duties for certain types of purchases made via the Internet and paid electronically.

According to him, the CBA takes various measures to increase the share of non-cash payments.

"The share of non-cash payments in Azerbaijan is still low and amounts to 6-7 per cent of total payments. Cash payment is still the majority type of transaction and is influenced by many factors. Tax evasion and the shadow economy as a whole are based on cash payments.

Poor awareness of the population about the benefits of electronic payments plays its role.
"The main objective of our package of proposals and the second state programme project is to eliminate these factors and to develop the appropriate infrastructure that will ultimately increase the share of non-cash payments in Azerbaijan to an international level, " Guliyev said.

He stressed much work was conducted within the activity on the development of this area. There are five processing centres and new payment systems are being introduced.

"We have created an opportunity for making various payments in more than 800 branches of the Azerpost national postal operator," he said. "We have also launched the portal of state payments. Earlier, it was possible to pay only utility bills. At present individual and legal persons can pay virtually all types of state payments. We have worked and continue working with the ministries and other agencies to expand the opportunities of the portal."

At present, the bill on electronic payments is being worked out. A working group, completing work on the bill, has been formed.

"We believe that it will be reviewed by the Azerbaijani Parliament during the autumn session," he added.

He stressed that the package contains proposals for the specification of the regulatory framework, based on international practice.

"This package ensures the administrative measures for the development and promotion of non-cash payments, as well as restrictions on the use of cash for payments in certain areas," he said. "This is widely-spread in international practice. We rely on the CIS experience, such developed countries as France and the U.S, having the restrictions on cash transactions between businesses. We envisage similar restrictions. This package shows some types of calculations which must be carried out only in non-cash form. "