The Finance Minister conducted an analysis to understand how entrepreneurs can generate such amounts by examining the mutual settlements of companies applying the general established regime with those operating under special tax regimes. In the past year, mutual settlements among them have doubled, rising from 5 trillion to 10 trillion tenge. "In this regard, out of the total turnover of 16 trillion tenge, mutual settlements with the general established regime amount to 10 trillion tenge under special tax regimes. This means that taxpayers, while earning hundreds of billions of tenge, pay minimal taxes," reported Takiyev.
Companies have utilized the following schemes to avoid paying VAT
• A company purchases goods and resells them at cost to another firm applying a special tax regime. As a result, the first company reports a loss and does not pay taxes, while the second avoids paying VAT by using favorable conditions;
• Restaurants operate as individual companies, with kitchens and karaoke areas decorated, while hotels have different floors belonging to various individual entrepreneurs (IEs). If one of them exceeds 78 million tenge in revenue, the company ceases operations, and another legal entity takes its place. This loophole allows them to evade VAT payments.
To avoid paying taxes for their employees, companies deregister them and register them as individual entrepreneurs.
This means that employees provide services to their employers not as individuals but as entrepreneurs. "Consequently, tax contributions to the wage fund decrease, and the social responsibility from the employer is transferred to the entrepreneur," explained Madi Takiyev.
To combat business fragmentation, the Finance Ministry proposes:
• Introducing a legislative measure for business fragmentation;
• Implementing the principle of the predominance of the essence of tax disputes over form;
• Introducing methods for monitoring and proving such facts;
• Restricting the types of services for individual entrepreneurs.