Tax Reform - The Times Of Central Asia

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Economy

Most Kazakhstani Citizens Fear Decline in Living Standards Due to Tax Reform

A majority of Kazakhstanis expect a planned increase in value-added tax (VAT) to negatively impact their standard of living, triggering higher prices, rising unemployment, and increased pressure on businesses, according to a survey conducted by the DEMOSCOPE public opinion monitoring agency. The results show that 61.4% of respondents believe the VAT hike from 12% to 16% beginning January 1, 2026, will reduce their quality of life. Of those, 32.4% anticipate a significant decline, while 29% expect a slight deterioration. Meanwhile, 20.6% believe the change will have no impact, and just 9% believe it will improve their living standards. Government officials have framed the VAT increase as necessary to boost budget revenues, stabilize the economy, and finance social spending. However, respondents overwhelmingly believe the reform will primarily benefit the state (63.8%) and wealthy citizens (27.9%). In contrast, only 10.2% think businesses will benefit, while 3.3% expect gains for the middle class and just 2% for low-income citizens. Additionally, 19.2% said no one would benefit, and 2.4% believe everyone will benefit. Respondents also identified several expected negative outcomes. A majority, 65.5%, expect a rise in prices for goods and services. Another 27.3% predict a reduction in the number of small and medium-sized enterprises, 26.5% foresee rising unemployment, and 19.6% anticipate growth in the shadow economy and tax evasion. Among entrepreneurs, 70.5% view the reform negatively. The VAT hike is seen as particularly detrimental to small and medium-sized businesses: 63.6% believe it will harm the sector, 14.8% foresee no impact, and only 10.3% predict a positive outcome. Overall, 52.8% of respondents expressed a negative view of the reform, while 33.4% were neutral and just 7.8% were positive. Nevertheless, some respondents did see potential benefits: 18.2% believe the reform will increase tax revenues, and 9.4% think it will improve living standards. A further 12.6% said they expect no significant changes. The findings suggest that many Kazakhstani citizens view the tax reform as a policy that favors the government and affluent elites, while placing disproportionate pressure on businesses and vulnerable population groups. As previously reported by The Times of Central Asia, in early October, Finance Minister Mady Takiev stated that authorities had identified suspected underreporting of taxable income by more than 260,000 businesses across the country.

Medicines

Kazakhstanis Face Drug Shortages and Soaring Prices

Kazakhstanis are paying significantly more for medicines than residents of many other countries, and often struggle to find essential drugs at all. According to the Agency for Protection and Development of Competition (APDC), rising prices, supply disruptions, and an inefficient procurement system are driving a worsening healthcare crisis. Price Hikes Kazakhstan’s medicine procurement system is complex. In principle, essential drugs should be available to patients free of charge under the guaranteed volume of medical care and mandatory social health insurance. In practice, many face shortages or receive lower-quality substitutes. As a result, patients are often forced to buy medicines themselves, an increasingly unaffordable burden. According to the APDC, inflated prices are caused by several factors. One is the lack of pricing transparency. Previously, drug prices were pegged to the highest prices in reference countries, figures submitted by suppliers without verification. As a result, generics sometimes cost nearly as much as original-brand drugs. Another issue is procurement through intermediaries. Up to 45% of state-purchased medicines are bought not from manufacturers but from local distributors, who add their own markups. Costs are also inflated by expensive inspections. To enter the market, companies must pay for production inspections, fees set independently by a state agency that can reach millions of tenge. These costs are passed on to consumers. To address these problems, the APDC has recommended switching to average reference-country prices, limiting inspections on products from countries with stringent regulations, and transferring inspection services to a state monopoly with controlled rates. It also urges more direct procurement from manufacturers and better verification of supplier costs. Tax Reforms Threaten Further Price Increases Despite already high prices, medicines will soon be subject to new taxes. Under Kazakhstan’s revised Tax Code, beginning in 2026, medical services and the sale of medicines and medical products will be subject to value-added tax (VAT), initially at 5%, rising to 10% from January 1, 2027. An exception will apply to medicines and services provided under the guaranteed medical care package and mandatory health insurance. However, as noted earlier, many patients struggle to access these programs in practice. Pharmaceutical companies warn that these VAT changes will drive prices even higher and lead to fresh shortages. Industry leaders also point to the planned 16% VAT on pharmaceutical raw materials, equipment, and components, calling it a distortion of tax policy and a threat to the sector’s stability. “The market is on the edge. Many drugs are already unprofitable and are being withdrawn. The introduction of VAT will accelerate the outflow. The number of registered medicines in Kazakhstan has already dropped from 12,000 to 6,900,” said Marina Durmanova, President of the Association for the Support and Development of Pharmaceutical Activity. “If no measures are taken, the country could face shortages of key drugs and further monopolization of the pharmacy sector,” she warned. Kazakhstan produces few essential medicines domestically, meaning prices continue to rise month by month. When Medicines Vanish, So Do Lives Price increases are only part of the crisis. Vital medicines frequently disappear...

Jewelry

Kyrgyzstan’s Jewelry Industry Emerges from the Shadows

The jewelry industry in Kyrgyzstan is experiencing rapid growth, marked by a surge in exports, an expanded geographic reach, and a significant rise in foreign trade operations, according to official statistics. According to the National Statistical Committee, Kyrgyz jewelers quadrupled the volume of foreign trade in jewelry made from precious metals during the first four months of 2025. This figure encompasses both exports and imports. Approximately 100 kilograms of jewelry, valued at around $600,000, were exported. Export revenues increased fourfold compared to the same period in 2024. Meanwhile, imports reached 15.6 tons, worth $5.8 million, more than double the previous year’s figures. Russia and Italy were the primary destinations for Kyrgyz jewelry exports. Business Legalization and Tax Incentives Stalbek Akmatov, president of the Kyrgyz Jewelers' Union, told The Times of Central Asia that this growth was driven by the industry’s formalization, which allowed jewelers to operate legally, pay taxes, and submit accurate reports. "First of all, I would like to thank our authorities, the Jogorku Kenesh and the Cabinet of Ministers," Akmatov said. "Recently, significant changes were introduced to the Tax Code and legislation concerning precious metals. Instead of three separate taxes, VAT, sales tax, and income tax, a single tax of 0.25% has now been implemented." Akmatov noted that the new tax policy has provided a substantial boost to production and exports, while significantly reducing the size of the shadow economy, which previously accounted for over 90% of the sector. Experts estimate that less than half the industry now remains informal. Entry into the Kazakh Market Kyrgyz jewelers are also exploring new markets. Akmatov highlighted that one company has already exhibited twice at a jewelry fair in Almaty and has begun selling products featuring national designs. "The current volume of exports to Kazakhstan is small, just a few kilograms, but it's only the beginning. The potential in this direction is enormous," he told TCA. Persistent Challenges: Scrap Gold and Regulation Despite these advancements, challenges remain. One major issue is the high cost of scrap gold for local producers. As was the case five years ago, scrap gold is sold with a 5% markup over the London gold price, even though Kyrgyzstan annually produces several dozen tons of gold and even more silver. Akmatov also pointed to restrictive regulations on the circulation of precious metals. "If gold could be traded freely like a currency, our sales would increase significantly," he stated. The Jewellers' Union is currently in talks with the Ministry of Economy and Commerce on liberalizing precious metals circulation within the country.

Tax Reform

Kazakhstan’s Lower House Passes Controversial New Tax Code Amid Public Backlash

On April 30, the Mazhilis, the lower house of Kazakhstan’s parliament, approved a new Tax Code by majority vote. The draft law, part of President Kassym-Jomart Tokayev’s broader economic reforms, has triggered intense public and political debate. While proponents highlight its emphasis on modernization and fairness, critics warn of increased pressure on businesses and potential inflation. The final decision now rests with the president, following Senate review. Key Reforms and Adjustments According to Berik Beisengaliyev, head of the Mazhilis working group, the final version of the Tax Code diverges significantly from the original draft submitted in August 2024. One of the major changes concerns VAT (value-added tax). The government’s initial proposal to raise the VAT rate to 20% was scaled back to 16%. The threshold for mandatory VAT registration has been raised from 15 million to 40 million tenge. Reduced VAT rates are set for medical services and medicines, 5% from 2026 and 10% from 2027. Goods and services tied to guaranteed free medical care, compulsory health insurance, and treatment of orphan and socially significant diseases will be VAT-exempt. Additionally, the VAT exemption will extend to socially significant food items, books published domestically, and related publishing services. Agricultural producers will benefit from a higher VAT offset, increased from 70% to 80%. Other reforms include a shift from a permissive to a prohibitive activity list, with a unified 4% tax rate that regional maslikhats can adjust by ±50%. Special tax regimes for business-to-business transactions are also being expanded. Corporate income tax (CIT) has been reduced to 5% from 2026 and 10% from 2027 for social sector organizations. The social tax deduction for people with disabilities has increased to 5,000 MCI (19.6 million tenge in 2025). Meanwhile, the CIT rate for banks and the gambling industry has been raised to 25%, though a 20% rate remains on banks’ business lending income. A progressive income tax scale will be introduced: 10% on annual wages up to 8,500 MCI (33.5 million tenge or roughly $65,000), and 15% on income above that threshold. For dividends, the rate will be 5% on income up to 230,000 MCI (1 billion tenge, or $2 million), and 15% thereafter. The code also proposes higher excise taxes on alcohol, tobacco, and heated tobacco products, along with a new excise on energy drinks as part of a health initiative. Land use provisions have been amended to penalize inefficient use of agricultural land, with payment rates increasing up to 100-fold. Mineral resource usage rates will vary based on license duration and the number of plots held. Political Dissent and Criticism The Ak Zhol party opposed the code in both readings, citing disproportionate fiscal burdens on SMEs while sparing large extractive firms. The party also criticized the VAT hike as inflationary and warned about the opaque nature of the risk management system (RMS), which they say allows for discretionary actions by tax authorities. “The code is bloated with over 100 new articles, making it more difficult for entrepreneurs to navigate. This is not...

Economy

Opinion: Kazakhstan’s Tax Reform May Come as an Unpleasant Surprise

Kazakhstan's tax reform has reached a critical juncture. This week, the Mazhilis, the lower house of parliament, approved the draft of the new Tax Code in its first reading. The sweeping document, comprising 822 articles, proposes the repeal of the current Tax Code along with the accompanying implementation law. While the reform fulfils directives issued by President Kassym-Jomart Tokayev in his 2022 and 2023 state-of-the-nation addresses, skepticism abounds. Experts and business leaders have voiced concerns, and lawmakers themselves have offered mixed reviews, with many adopting a critical stance. Concerns About Scope and Timing Though tax professionals broadly agree on the need for tax reform, some warn that the current version may be the most stringent in over two decades. Critics argue that without addressing structural inefficiencies in government spending, raising taxes alone will not yield the desired outcomes. They emphasize the need for a balanced approach that supports both fiscal sustainability and economic resilience. Adding to the unease is the timing. Kazakhstan, like many economies, faces mounting global pressures. The threat of a financial downturn, exacerbated by falling energy prices and international tariff disputes, has prompted urgent consultations at the highest level. Tokayev recently convened a closed-door meeting with the prime minister and the head of the National Bank, instructing them to finalize a government action plan to mitigate potential economic fallout and maintain investment flows. A Mixed Bag of Reactions Some analysts acknowledge that the existing Tax Code, adopted in 2008, is outdated. They argue that reforms are essential to address digitalization, evolving business models, and new global challenges. Calls for improved tax administration, especially the simplification of procedures and adoption of risk-based oversight, aim to ease pressure on law-abiding businesses while better targeting the informal sector. The draft law also seeks to limit inefficient tax exemptions and make incentives more focused and transparent. These changes are framed as part of Tokayev's broader economic transformation agenda, which prioritizes fair taxation, industrial processing, and innovation. Nonetheless, many entrepreneurs remain uneasy. Economic instability, lingering post-pandemic effects, geopolitical risks, and sanctions-related supply disruptions have left businesses vulnerable. Critics worry that introducing a more demanding tax regime now may fuel uncertainty and discourage investment. Additional concerns center on governance. Persistent issues of corruption, selective enforcement, and administrative overreach have eroded public trust. Without parallel reforms in public administration, experts argue that changes to tax policy alone may fall short. Divided Political Reception The draft Tax Code’s passage through its first reading does not guarantee smooth sailing. Even the ruling Amanat party, while supporting the bill, has voiced reservations. Its members have called for safeguarding small and medium-sized enterprises and enhancing investment incentives. The opposition Ak Zhol party has been the most vocal critic. Its leader, Azat Peruashev, characterized the proposal as a fiscal crackdown rather than genuine reform. The faction demands greater transparency, public consultations, and a reconsideration of proposed VAT hikes and lower registration thresholds. Meanwhile, the pro-business Respublica party supports the reform in principle but insists on greater simplification in business-tax...

Tax Reform

Ruling Party Urges Government to Revise VAT Reform Plans

Kazakhstan's ruling Amanat party has called on the government to revise its proposed tax reforms, particularly those affecting the value-added tax (VAT). The party is pushing to double the planned threshold for mandatory VAT registration, warning that the current proposal could harm small and medium-sized businesses. Under current law, businesses must register for VAT if their annual turnover exceeds 78.6 million KZT (approximately $152,000). The government's draft reform proposes to lower this threshold to 15 million KZT (around $29,000). It also includes raising the basic VAT rate from 12% to 16%, introducing a zero rate for agricultural producers, a 10% rate for selected industries, and gradually applying VAT to the healthcare sector. The reform also proposes eliminating 128 tax exemptions worth more than 1.3 trillion KZT. A progressive personal income tax is also under discussion. With a base rate of 10%, the government suggests introducing a 15% rate for annual incomes exceeding 8,500 MRP (monthly calculation index), equivalent to over 33.5 million KZT. For 2025, the MRP in Kazakhstan is set at 3,900 KZT (about $7.50). The draft Tax Code is scheduled for a first reading in the Mazhilis, Kazakhstan’s lower house of parliament, on Wednesday, April 9. On the eve of the session, government officials presented the proposals at an expanded meeting with Amanat’s parliamentary faction, which holds 62 of the 98 Mazhilis seats. Amanat deputies voiced strong opposition to the proposed reduction in the VAT registration threshold, warning it could drive businesses into the informal economy. Instead, they urged the government to raise the threshold to at least 30 million KZT (approximately $58,000). The party also proposed exempting 19 socially important food items from VAT to ease the financial burden on citizens. These items include flour, bread, pasta, eggs, buckwheat, rice, sugar, vegetable oils, various meats (such as beef and chicken), dairy products (milk, kefir, cottage cheese), staple vegetables (potatoes, carrots, onions, cabbage), and salt. “Particular concern was expressed over proposals to apply VAT to healthcare and to tax financial services,” the party said in a statement. “Such measures would drive up prices and impose additional costs on the population, which is unacceptable under current conditions”. As The Times of Central Asia previously reported, the government initially considered raising the VAT rate to 20%, but President Kassym-Jomart Tokayev rejected that proposal in favor of a more moderate increase.