Tax reforms to enable to detect violators

The recent changes to the Tax Code of the country remain the major headlines. Azerbaijan’s Ministry of Taxes created a special working group jointly with local banks to tackle technical issues linked with the taxation of e-trade, which is envisaged under new amendments.

Head of the legal affairs department of the ministry Samira Musayeva told journalists that the group, headed by the first deputy taxes minister will be engaged in the issues of technical faults in banks.

Commenting on the recent consent between Financial Market Supervisory Body (FMSB) and the Taxes Ministry on granting a onemonth delay for the application of the taxation mechanism by banks, Mustafayeva said that the delay does not suppose exemption of etrade from taxation, as the issue cannot be decided by either the ministry or banks.

“The law has already come into force and it does not have a retroac- tive effect,” she clarified.

The recently approved changes to the Tax Code of the country also envisage taxation of e–trade, in particular, collection of VAT from individuals participating in online competitions and purchasing operations.

Exceptions are a purchase of airline tickets and reservation of rooms in hotels by means of online services. For now, the law is not being implied on tangible goods, purchased by means of online serv- ices.

Addressing a forum organized by Deloitte and dedicated to the recent amendments to the Tax Code, Musayeva said that local banks will issue loans cashless starting from 2017. She noted that limit will be applied when cashing out the loans issued by the banks operating in the country.

“Customers will be able to cash any sum. But, if the customers implement an entrepreneurial activity, they will pay tax in the amount of 1 percent of the sum. Non-taxpayers will not be charged.”

She noted that the switch from entrepreneurial account to a running one (aimed at tax evasion) will be fined. As of early December 2016, the volume of loans of credit organizations amounted to 16.3 billion manats ($9.18 billion).

Speaking at the event, Anar Novruzov, a financial specialist at the International Bank of Azerbaijan (IBA), offered the Taxes Ministry to submit a database on taxpayers to local banks.

“The country will soon implement monitoring into all financial operations worth over 15,000 manats (for simplified tax payers) and over 30,000 manats (for VAT payers).

The Taxes Ministry possesses a necessary database on taxpayers, while it is practically impossible for banks to check each taxpayer individually. The ministry suggests manual checking of each tax ID (VOEN) in their system, but this is not constructive approach. Therefore, we want to get an access to the database to create a special script allowing to automatically classify payers of simplified tax and VAT payers,” he said.

Managing partner of Deloitte in Azerbaijan Nurlan Kerimov, in turn, said that the reforms will allow to differentiate honest taxpayers from violators of the tax legislation.

“Last year marked the introduction of huge number of reforms, including those in the sphere of taxes. Tax supervision strengthened, checking procedures improved. From now on, honest taxpayers will be differentiated from debtors. Control over honest tax payers will be weakened. Besides, special incentives mechanisms will be developed for them," he underlined.

Some 145,874 entrepreneurs have passed registration in the ministry in 2016. As of January 1, 2017 the total number of taxpayers in the country exceeded 885,000.