So far, the Milli Majlis and the State Tax Service have not made public the additions and changes that will be made to the Tax Code. According to official data, more than 400 proposals were received for inclusion in the Code, and some of them were taken into account. In the coming days, the deputies of the Milli Majlis will discuss changes to the Tax Code, which is the most important document for the country’s business. Many serious innovations are reflected here, including benefits related to the zones liberated from occupation, which are of particular importance for Azerbaijan. However, without any legal basis, the full changes to the Tax Code are not brought to the attention of the public.
What is the reason?
Lawyer Akram Hasanov answered ASTNA questions.
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Question: In your opinion, what is the reason for the fact that the amendments to the Tax Code have not been made public?
Answer: The draft amendments to the Tax Code actually had to be published no later than October 25, as it is included in the package of documents attached to the bill on the state budget. However, we have a common occurrence when bills are not made public.
The website of the Milli Majlis has a section “Draft Laws”. Looking at this section, you can be sure that a very small part of the projects submitted for discussion in the autumn session has been published.
There are three reasons for this. The first reason is illiteracy. The designs are terrible. They do not publish right away because they are ashamed. They can submit them only after discussion and refinement within the framework of state bodies.
The second reason is poor management and organization. They cannot solve most of the tasks in a timely manner. Even some instructions of the President remain unfulfilled for years.
Finally, the third reason is that laws in Azerbaijan are usually developed not for the people, but for officials. Marx said that law is the will of the ruling class raised to the level of law. Our ruling class is an army of officials. Laws also mostly serve them. The people are secondary. Therefore, any important project is discussed exclusively between groups of officials. Meanwhile, there is bargaining going on between them, and so on. Naturally, since people are not the subject, but the object of this bargaining, projects are hidden from them. The law is adopted when the auction is completed and the final draft is ready. For example, the bargaining around the Competition Code has been going on for 15 years!
After that, our deputies say that the law was adopted on behalf of the people and for the people. Note that not only the Milli Majlis as a body, but none of the deputies (including those who are trying to present themselves as independent, really elected) do not scan or advertise the draft. Although they have every right to do so. But our deputies are afraid to come up with such an initiative, because they feel that they are subordinates of the speaker, not deputies. After all, they are part of the army of officials. And they have business interests. In backstage discussions around projects, they also want to implement their proposals generated by self-interest. Therefore, they do not violate the rules of the game of the army of officials. Budget and tax matters are the primary market for public administration. Members of Parliament are also part of this closed market.
Question: Can citizens expect any new “surprises” from keeping these changes secret? What are these “surprises”?
Answer: The ordinary citizen does not expect “surprises” directly. Because it is not yet subject to income tax. The tax he pays on land and property is low, and his rate will probably not be increased. Although the value-added tax he pays is 2/3 of the total taxes collected, it is invisible because it is an indirect tax. I do not expect innovations for ordinary citizens with regard to this tax.
In all likelihood, “surprises” for the most part await entrepreneurs. Tax administration will be further strengthened. As a result, large “business structures” close to officials will acquire more advantageous positions in the competition compared to real entrepreneurs. After all, the problem is not in what kind of administration, but in its application in full force only to those entrepreneurs who are not related to officials and state projects.
Question: Avaz Guliyev, deputy head of the Main Tax Policy Department of the State Tax Service under the Ministry of Economy, told local media that the draft amendments to the Tax Code, which should come into force on January 1, 2023, are mainly grouped into 5 areas. The first direction is to encourage the investment climate in the country, including domestic production. As a second direction, we can point to the reduction of fixed tax expenses of banks that are in the process of liquidation. The third direction provides for the regulation, as well as the improvement of a number of unresolved issues of tax administration. The goal of the fourth direction is to reduce the tax and financial burden of the population with social benefits. And the fifth direction covers such changes as increasing and maintaining the country’s international rating. The media contains only this information. What conclusion can be drawn from this information? What changes can occur?
Answer: In all likelihood, the answer will be approximate. I’m sure there are also quite a few positives. But, since the project is being hidden, let’s focus on the negative expectations so that the positive ones are a surprise for us!
In the first direction, the talk is about encouraging the investment environment, including local production, which probably refers to indulgences that will be applied mainly to bureaucratic business and companies involved in government projects. Because that’s what usually happens. In our country, government benefits and incentive programs are actually a good feeder. Real stimulation of the investment climate requires, first of all, ensuring the rule of law in the country. Where there is no legitimacy, any incentive basically leads to abuse. Because there is no transparency.
The second direction should objectively serve to reduce the costs of banks in the process of liquidation and return creditors’ funds. But in fact, banks in the process of liquidation are also a good feeder. As a result of the lack of transparency, creditors’ funds are largely non-refundable. It’s just that someone gets rich. So these changes will serve to enrich someone.
The third direction serves to further tighten tax administration and prevent tax evasion. Objectively, this is a necessary thing. But in fact, as I already mentioned, real entrepreneurs will mainly suffer from tightening. After all, our tax is more like a tribute.
The goal of the fourth direction is to reduce the tax and financial burden of the population with social benefits. Most likely, there will be some minor exceptions to some of the taxes that citizens pay. This is done for show, to demonstrate the social nature of the changes.
The positioning of the fifth direction as “increasing and maintaining the country’s international rating” is reminiscent of the socialist competition for the “challenge Red Banner” in Soviet times. Western ratings are mainly based on formal indicators. Our officials are also analyzing these indicators and adapt laws to them. Obsessed with formalities, they ignore the content. For example, our tax authority is one of the world leaders in the speed of registration of commercial legal entities. This is a step taken solely for the sake of rating. But the legislation on commercial legal entities (corporate law) itself is in an ugly state.
Naturally, the final opinion about the project can be obtained by reading it. I will only be happy with unexpected positives.
Question: The draft amendments to the Tax Code for residents who will work in the territories liberated from occupation provide, from January 1, 2023, exemption from income and income taxes, property and land tax, as well as simplified taxation for a period of 10 years. How can you evaluate this step?
Answer: In general, this is an understandable and positive phenomenon. Of course, the development of these territories is currently the number one issue. But activities in the territories liberated from occupation, including public procurement, are not transparent. Consequently, corruption risks are also high. Therefore, there may be corrupt people who benefit from innovation. In addition, in conditions of non-transparency, there is a possibility that the business of residents of these territories in other regions of the country will also abuse benefits. Under the condition of normal tax administration, this can be prevented. But normal administration is not what is written in the law, but its equal application to all. But whether this will be the case in reality is a big question.
Question: The trend of refusing to promulgate laws and changes in legislation has already become a tradition. Is it legal? How to put an end to this?
Answer: This tradition was legalized by those who write laws. Because they pass laws not on behalf of the people and not for the people. As I said, they make laws for the army of officials. This can be put to an end if each of us personally turns to the deputies and demands that the draft be made public. For example, I found on Facebook that MP Vugar Bayramov wrote an article on one of the issues of the draft amendments to the Tax Code. I asked him why they don’t publish the draft, why don’t any of the deputies do it? True, until he answered. But let’s increase the number of such questions. There will be one of two results. Or they will finally start publishing projects. Or they will be embarrassed to appear in society and will be completely silent. At the very least, we will know that those who present themselves as our delegates, in fact, are not! This is also a comfort!