Kazakhstan’s PM Bektenov Gives Major Construction Firms Tax Ultimatum
Kazakhstan’s Prime Minister, Olzhas Bektenov, has accused the country’s two largest construction companies, Bazis and BI Group, of tax evasion. The State Revenue Committee later substantiated these claims, notifying the firms of additional taxes amounting to KZT 16.5 billion (over $32 million).
Business Fragmentation
The allegations against the developers emerged during a meeting between Bektenov, National Economy Minister Serik Zhumangarin, and Finance Minister Madi Takiyev.
Takiyev explained that many Kazakhstani businesses exploit legal loopholes by dividing their operations into multiple legal entities to minimize tax obligations. He cited examples from the hospitality industry, where bars, kitchens, and karaoke sections within a single venue are registered as separate businesses, or where each floor of a hotel is owned by different individual entrepreneurs.
This practice enables businesses to evade value-added tax (VAT). Once a company’s revenue reaches the KZT 78 million ($155,500) VAT registration threshold, it ceases operations and is replaced by a new legal entity.
“To reduce payroll taxes, businesses remove employees from their staff, register them as individual entrepreneurs, and then contract them as external service providers. This lowers tax liabilities, shifts social responsibility from the employer to the entrepreneur, and significantly reduces payroll tax contributions,” Takiyev explained.
According to his figures, Kazakhstan currently has 2.3 million registered taxpayers, but only 8% (137,000) are VAT payers due to this loophole. Additionally, 81% of all businesses operate under a simplified tax regime, with 85% of them reporting an annual income below KZT 15 million ($29,900).
“An analysis has shown that transactions between these tax schemes doubled over the past year, from KZT 5 trillion to KZT 10 trillion. In other words, while generating hundreds of billions in revenue, these businesses pay negligible taxes,” Takiyev stated.
He noted that such schemes are prevalent not only in the service sector but also in real estate development.
Final Warning
Bektenov explicitly named companies under scrutiny.
“We have a complete list of major businesses employing these tactics. Among them are well known construction giants such as BI Group and Bazis, as well as popular restaurants, fitness clubs, and other companies across various industries,” he said.
Bektenov issued a two-week ultimatum for these businesses to settle their tax arrears.
“If they fail to act, the government will use all available fiscal and law enforcement mechanisms. The conversation will be tough, but we are open to dialogue, if businesses are prepared to act fairly toward the state,” he warned.
By the end of last week, tax authorities had formally notified Bazis and BI Group of their outstanding obligations.
Bazis was instructed to correct tax filings for an undeclared KZT 4.6 billion ($9.2 million), while BI Group was found to have understated its taxable base and income by KZT 11.9 billion ($23.8 million).
The companies have been given an opportunity to amend their tax reports and pay the additional amounts before formal inspections begin. So far, neither developer has publicly responded to the accusations.
As previously reported by The Times of Central Asia, Kazakhstan is set to reform its tax system by raising the VAT rate from 12% to 16% and lowering the VAT registration threshold from KZT 78.6 million to KZT 15 million ($30,000).
