Shadow Economy - The Times Of Central Asia

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Income Growth Plan

Opinion: Kazakhstan’s New Income Growth Plan – Administrative Measures Against Market Realities

Kazakhstan’s government has unveiled a Comprehensive Plan to Increase Household Incomes for 2026-2029. The Ministry of National Economy says it contains 59 measures. The stated goals include higher wages and lower inflation. The plan also aims to ease household debt. The full text of the plan has not yet been published in open access. First Vice Minister Azamat Amrin presented its main provisions at a Government press conference on June 11. The central contradiction lies in the fact that guaranteed income growth applies to only a small segment of the population. The plan creates fundamentally different conditions for the public and private sectors. It provides for mandatory salary indexation for civil servants. Their wages will be revised every three years based on accumulated inflation. According to labor market data, this category includes about 85,000 to 90,000 people less than 1% of the country’s total workforce of around 9.3 million. It is this narrow group that receives a reliable long-term mechanism of financial protection. Indexation is also planned for employees of national companies and natural monopolies. This group includes around 700,000 to 800,000 people, or 8-9% of the labor market. Employees in the social sector, teachers, doctors, and others, receive their salaries directly from the state budget. This category numbers around 1.2 million to 1.3 million people, or 13-14% of the workforce. Under Kazakhstan’s law on public service, these workers are not considered part of the state administrative apparatus. The plan does not introduce automatic three-year indexation for them; their incomes are raised through separate government decrees, usually on an annual basis depending on budgetary capacity. More than 7 million people work in the competitive private sector, small and medium-sized businesses, as well as the self-employed, accounting for more than 75% of the workforce. For this dominant category, the plan offers no direct mechanisms for income growth. Instead of financial guarantees, the document proposes using an administrative lever: officials will hold talks with private business owners to encourage them to raise wages. The only basic indicator directly affecting the incomes of low-paid private sector workers is the minimum wage. However, the government has postponed revising the minimum wage until August 2026. Private business bears the main market risks and forms the country’s tax base. It is these taxes that finance guaranteed incomes in the public sector, which in total accounts for around a quarter of the labor market, while the overwhelming majority of working citizens, about three-quarters, have no comparable protection. Economist Murat Temirkhanov, an adviser to the chairman of Halyk Finance who took part in expert discussions of the government’s plan, says this approach distorts market relations. A directive requirement to raise wages could push businesses away from formal hiring and into the shadow economy to cut costs. In his view, the plan ignores the only real source of income growth: higher labor productivity. The document devotes only one point to this factor, even though international institutions such as the International Monetary Fund and the World Bank have directly recommended...

Gold Mining

Kazakhstan Registers Five New Gold Deposits as Jewelers Seek Raw Materials

Citing World Gold Council data, Azamat Panbayev, chairman of the Industrial Committee at Kazakhstan’s Ministry of Industry and Construction, said Kazakhstan ranked 14th globally in gold production last year. He was speaking at the VII Forum of Gold Producers of Kazakhstan held as part of the international Astana Mining & Metallurgy Congress 2026. “The gold mining industry remains one of the strategically important sectors of industry and makes a significant contribution to the country’s economic development,” Panbayev said. “Kazakhstan has a substantial mineral resource base: 374 gold deposits with total reserves of 2,369 tons are currently listed on the state balance sheet. Last year alone, five new deposits with reserves of around 98 tons of gold were added to the state register.” According to the Ministry of Industry and Construction, Kazakhstan produced 71.2 tons of refined gold in 2025, while investment in precious metals production reached $202.6 million, up 38% from the previous year. Gold refining in Kazakhstan is carried out by Tau-Ken Altyn LLP, the country’s only specialized state refinery and a subsidiary of National Mining Company Tau-Ken Samruk JSC. The Astana-based plant purchases doré, a semi-refined alloy containing gold and silver, from gold mining companies and sells gold refined to 99.99% purity. However, only 5% of the raw materials purchased by jewelers in Kazakhstan come from the Astana refinery, said Kanat Baitov, executive director of the Dragnet Association. He estimated that more than 50% of the industry’s raw materials market remains in the shadow economy. “We mine 70 tons of gold every year. If even 20 tons, or at least 5 tons, of that were used for jewelry production, the industry would have real potential,” Baitov said. Kazakhstan has introduced a VAT exemption for jewelers purchasing granulated gold from the state refinery, according to Baitov. “They are ready to supply not only granulated gold but, over time, if volumes increase, they are also prepared to supply alloys to the domestic market and could produce ready-made assay standards for jewelers,” he said, referring to Tau-Ken Altyn. He noted that jewelers would only be able to benefit from the new tax incentives for purchasing raw materials from the state plant if they increased procurement volumes. Currently, by his estimate, purchases do not exceed 30 kilograms per year. He added that such practices could eventually raise questions from the state regarding the origin of the raw materials used by jewelers in Kazakhstan. Zhaniya Dabyr, co-owner of the jewelry company Kazakhyuvelir, said the industry faces several challenges. These include high raw material costs, limited access to financing, the shadow market, insufficient government support, weak promotion in foreign markets, and limited tax incentives. “We propose expanding the mechanism for selling gold to domestic manufacturers and introducing a more flexible system of installment payments, fixing the gold price on the purchase date, as well as considering discounts for domestic producers and additional preferences for export-oriented companies,” Dabyr said. Kazakhyuvelir also proposed creating a digital accounting system for the jewelry market that would cover manufacturers...

SMEs

Small Businesses in Kyrgyzstan Struggle With Expensive Loans and Border Delays

Small and medium-sized businesses now account for more than half of Kyrgyzstan’s economy, but entrepreneurs continue to face high borrowing costs, logistical bottlenecks and rising operating expenses, according to First Deputy Chairman of the Cabinet of Ministers Daniyar Amangeldiev. According to Amangeldiev, the share of small and medium-sized enterprises (SMEs) in the national economy has reached 51.7%, making the sector one of the country’s key drivers of employment and domestic demand. “The main obstacle at the moment is access to financing,” he said during a press conference in Bishkek. Amangeldiev noted that average lending rates in Kyrgyzstan remain at around 19-20%, while the profitability of many businesses does not exceed 15%. As a result, borrowed capital becomes prohibitively expensive, limiting companies’ ability to expand. The government is currently negotiating with the banking sector to reduce loan costs and has already allocated approximately $3.4 million to support small and medium-sized businesses. Authorities have also introduced interest-rate subsidies to expand entrepreneurs’ access to financing. In addition to expensive credit, businesses continue to face logistical and customs-related difficulties. According to Amangeldiev, delays in certification procedures and border clearance disrupt supply chains and reduce trade turnover. “While cargo remains stalled at the border, entrepreneurs’ financial resources are effectively frozen together with the goods,” he said. The government is placing particular emphasis on the agricultural sector, which remains one of the country’s largest employers. The Cabinet of Ministers has instructed financial institutions to accelerate loan issuance for agricultural producers, noting that the speed of capital turnover is critical for agribusiness operations. The Kyrgyz authorities are continuing efforts to bring more businesses out of the shadow economy. In 2024, the government abolished part of the voluntary patent-based trading system and required entrepreneurs, including small traders and some tax-exempt businesses, to use cash registers and digital fiscal systems. The reforms triggered resistance among some entrepreneurs. However, authorities argue that increasing transparency in trade is necessary to broaden the tax base and modernize the economy.

Employment

Kazakhstan Authorities Acknowledge Gap Between Real Scale of Shadow Employment and Official Data

Kazakhstan’s authorities have acknowledged a significant discrepancy between official estimates of informal employment and administrative data, highlighting the scale of the country’s shadow labor market. Minister of Labor and Social Protection Askarbek Yertaev said the actual number of people working outside the formal economy could be almost three times higher than indicated by official statistics. He made the statement during a Senate meeting devoted to regional development issues. Presenting the ministry’s assessment of informal employment, Yertaev noted that out of a workforce of 9.7 million people, only 6.7 million made mandatory pension contributions at least once in 2025. Of these, 5.3 million were employees and 1.4 million were self-employed. This leaves around 3 million people without recorded pension contributions. According to the minister, the figure significantly exceeds official estimates. Data from the National Statistics Bureau indicated that at the beginning of 2025, informal employment accounted for about 12% of the employed population, or just over 1.1 million people. Yertaev said the discrepancy suggests that a substantial number of citizens either work informally or underreport their income. Additional evidence of the scale of shadow employment comes from differences between statistical data and digital administrative records. While official statistics show 7.1 million registered employees, the Unified System for Accounting for Employment Contracts records contracts for only 4.1 million people. Among the factors driving workers into informal employment, Yertaev cited overdue debts and the freezing of bank accounts, which he said may encourage individuals to conceal income and avoid formal labour arrangements. To address the issue, the Ministry of Labor plans to expand the use of digital tools aimed at facilitating formal employment. This includes the introduction of AI solutions on the Electronic Labor Exchange portal. According to the ministry, an AI-based system will automatically match job seekers with vacancies based on their education and professional background, while also supporting users throughout the job search process. Deputy Chairman of the State Revenue Committee of the Ministry of Finance Zhanibek Nurzhanov also presented the results of a pilot project on platform employment. Implemented jointly with the Ministry of Labor, the initiative led to the registration of more than 43,000 taxi drivers as individual entrepreneurs under a special tax regime. The State Revenue Committee’s information systems are now integrated with 31 online platforms, a step authorities say should help bring more workers into the formal economy. Participants in the Senate discussion stressed that efforts to reduce shadow employment should combine enforcement measures with policies that encourage voluntary legalization of labor relations. As The Times of Central Asia previously reported, proposals to combat the payment of undeclared wages included sectoral agreements on salary levels and requirements for companies to disclose employment structures.

Gig Economy

Taxing the Gig Economy in Kazakhstan

Beginning in 2026, Kazakhstan plans to introduce enhanced oversight of citizens’ mobile transfers. Officially, the measure is framed as part of efforts to combat tax evasion. In practice, however, it represents a large-scale fiscalization of the gig economy, which employs hundreds of thousands of taxi drivers and couriers. The primary focus of the campaign is workers on digital platforms, including ride-hailing and delivery services. The authorities classify them as individual entrepreneurs who underreport or conceal income. Yet the economic reality is more complex: for many, this is less a shadow economy than a form of concealed unemployment operating under the label of “self-employment.” Hidden Unemployment Rather Than a Shadow Economy In recent years, the gig economy in Kazakhstan has become structurally significant. Industry estimates suggest that hundreds of thousands of people now work through digital platforms, and the number continues to rise. For most drivers and couriers, this is not supplementary income but their principal, and often only, source of earnings. The drivers of this trend are well known: limited job opportunities in many regions and a persistently high household debt burden. Elevated levels of consumer lending have compelled many citizens to seek fast, accessible sources of income, even where margins are thin. At the same time, tax authorities treat these workers as entrepreneurs who deliberately avoid taxation. However, they lack core characteristics of independent businesses: they do not set tariffs, generate demand, or accumulate capital. Their status more closely resembles digitally mediated wage labor without corresponding social protections. Tax on Turnover, Not Profit Platform-based work is highly sensitive to additional costs. Digital aggregators typically retain commissions of 20-25% on each order. The remainder is not net profit but gross turnover, from which drivers must cover fuel, maintenance, depreciation, and other operating expenses. Industry assessments indicate that a taxi driver’s net income after expenses rarely exceeds 40-50% of the order value. It is from this turnover that taxes are now expected to be withheld. Under the proposed model, platforms would act as tax agents, automatically deducting payments from each transaction. Options under discussion include a flat 4% rate or a system combining fixed social contributions with a 1% income tax. These measures are presented by officials as simplifying compliance and reducing administrative burdens. The central issue, however, is that taxation would occur before expenses are accounted for. For businesses with substantial profit margins, this may be manageable. For drivers operating on minimal profitability, it could prove critical. Digital Control as a Point of No Return Previously, some workers partially offset costs by accepting direct mobile transfers, operating in what officials describe as a “gray zone.” This avenue is set to narrow significantly. Under the current financial monitoring framework, if an individual receives transfers from 100 or more different senders over three consecutive months, the information is automatically transmitted to tax authorities. For taxi drivers, this threshold may be reached within days of active work. As a result, opportunities for informal adjustment are effectively disappearing. Who Ultimately Bears the Cost Digital...

Kazakhstan Deploys AI to Tackle Shadow Economy

Kazakhstan is entering a new phase of fiscal digitalization, leveraging artificial intelligence to identify and analyze illicit schemes in the shadow economy. Building on the existing Smart Data Finance platform, a system for storing and processing big data, a new digital solution will be developed to integrate information systems across government agencies. Deputy Minister of Finance Yerzhan Birzhanov announced the initiative, stating that Smart Data Finance, which has been in use for over a year, has already proven effective in detecting tax violations. The system aggregates data from external sources and implements a “Taxpayer Dossier,” enabling the creation of digital profiles for legal entities and individual entrepreneurs. The forthcoming upgrade will enhance Smart Data Finance’s capabilities by allowing it to cross-reference data from tax, customs, labor, and industry systems. This integration will help identify vulnerable sectors prone to “gray” economic practices and track the flow of illicit activity across industries. Simultaneously, the government has decided to replace separate sectoral roadmaps with a unified Comprehensive Plan to Combat the Shadow Economy. This plan, too, will be monitored using AI-powered tools. According to the Cabinet, substantial progress has already been made in digitizing high-risk sectors such as trade, construction, transport, healthcare, education, and agriculture. Special attention is being given to the trade sector, which remains one of the most susceptible to shadow operations. The ongoing implementation of several tools, including the National Catalogue of Goods, a domestic producer registry, labeling and traceability systems, electronic invoicing, digital VAT, and the digital tenge, is intended to reduce opportunities for illegal transactions. As previously reported by The Times of Central Asia, Kazakh authorities have steadily escalated pressure on the shadow sector in recent years. Measures range from tightening controls on smartphone imports to negotiating with employers to curb the practice of paying salaries “in envelopes.”