Tajik authorities continues to introduce new types of taxes and duties. This is happening despite the year-long reform of the tax code. However, this is only part of the bigger picture, on which an independent researcher, Muslimbek Buriev, elaborates in an article for CABAR.Asia.
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A country like Tajikistan, lacking sufficient natural resources, poor investment climate and limited export items, is forced to look for other sources of profit. Recent years showed that people are becoming such a source. Individual entrepreneurs and large commercial companies also fall into this category.
To realize this source, the authorities usually seek to introduce new taxes and increase existing payments. Measures to establish control over the most profitable sectors of the economy, introducing obligations for foreign companies, serve as additional instruments for that cause.
This article will consider a similar strategy of the Tajik authorities; consider the main and most illustrative cases. A separate focus will be placed on the political side of such a strategy: the factor of increasing the legitimacy of the authorities and the main aspects of the rhetoric accompanying such decisions.
The tax burden
According to the PWC rating, Tajikistan is in the top 12 countries with the highest total tax burden, which is 67.3%.[1] Such a high indicator is usually typical for countries with large GDP and with proportionally high spending on social services and infrastructure. However, Tajikistan is a country that does not have such characteristics. The incomes of the country’s population are very low, and wages in the public sector do not satisfy all needs. The average monthly salary for 2018 was $ 135 – the lowest number in the CIS.
Many residents of the country live off funds sent by migrant workers. Citizens are forced to rely on the accumulation of their savings, putting them at risk amid the country’s unstable banking system. Pensions in Tajikistan are the lowest when compared with the rest of Central Asia – they average $ 31.[2] Looking back at PWC rating, the total taxation in Kazakhstan is 28.4%, in Uzbekistan – 31.6%, and in Kyrgyzstan – 29%.[3] As a result, in Tajikistan, with the highest taxes in the region, the amount of social benefits is the lowest.
At the same time, the state treasury suffers from shortfalls. For 2020, the state budget did not receive tax funds in the amount of $ 55 million.[4] During this period, first of all, the pandemic made its own adjustments, as a result of which small and medium-sized enterprises were unable to fully secure the budget revenues planned at the beginning of the year. However, in 2019, the state budget also did not receive funds with undercollection of taxes accounted for much more – $ 165 million.[5]
Thus, the budget deficit is more likely an endogenous problem rather than the result of external factors’ influence. The fact that the budget profitability is fluctuating, forces the state to seek assistance from international donors or major powers such as China, especially for improving infrastructure. Against the backdrop of budget deficit, Tajikistan has to rely on international loans every year, which only increases the public debt.
2019 is the Year of Taxes in Tajikistan
The Tajik authorities see a natural way out of the situation in increasing existing taxes. During budget planning, the authorities establish the revenue side of the budget, with taxes constituting 60-70 % of it.[6] In 2021, the state plans to receive 6% more revenues than in 2020. In 2019, it was planned to collect 10.8% more taxes than in 2018. At the same time, the Ministry of Finance of Tajikistan predicted that, annually for the period 2020-2021, the volume of tax revenues to the budget of the republic will increase by an average of 10%.[7]
2019 was an overall significant year for developments in the area of tax levies. In February of that year, compulsory payments were introduced for construction companies to obtain a formal permit to build any type of residential and commercial premises in Dushanbe in the amount of $ 16 to $ 20 per square meter. The decision became part of the amendments introduced to the law “On other obligatory payments to the budget.”[8]
A few days later, the government increased the VAT (Value-added tax) from 5% to 18% for construction companies.[9] Interestingly, in 2018, the rate of housing commissioning in Dushanbe increased by 11% compared to 2017.[10] The construction industry in Dushanbe, especially in recent years, has been developing rapidly, which may explain a series of decisions that put additional burden on construction companies, primarily in the capital of Tajikistan.
Further, in April, within the framework of the previously mentioned law “On other obligatory payments to the budget,” the parliament of Tajikistan introduced tax duties for tourists.[11] According to the decision, foreign tourists and citizens of the country traveling abroad have to pay $ 1 per day, and pilgrims performing the Hajj – $ 50. Previously, it was reported that the flow of tourists in 2018 increased by 190% percent.[12]
Tajik Internet 2.0
On January 19, 2021, the Tax Committee obliged Tajik bloggers to pay income tax.[13] This, as expected, caused a negative reaction from the bloggers themselves, whose income in social networks is not so big. However, this is not the first time the government has tried to ensure its profitability through the digital space.
The telecommunications sector was of great interest to the Tajik authorities for monetization for a long time. In November 2016, the country’s leadership, represented by the state-owned Tajiktelecom Company, created a Unified Switching Center (USC).[14] Its essence lies in the establishment of one channel for the distribution of Internet traffic in the country. In fact, Tajiktelecom became a state monopoly, passing through its system all traffic supplied from outside Tajikistan. Private Internet providers and companies providing mobile services are thus forced to purchase Internet from the state. As a result, at the time of the start of USC’s work, companies raised prices for their tariffs or limited offers for existing service packages.
In doing so, an explicit security narrative accompanied the establishment of the USC. The main arguments of the government concerned national and information security.[15] Extremist organizations are known to use various Internet platforms to spread radical ideas and attract like-minded people to their ranks.
The USC allows authorities to monitor all traffic by tracking such interactions, including via phone conversations. Thus, the monopolization of the Internet allowed the government of Tajikistan both to provide itself with a source of additional income and to strengthen control over the digital sphere in general. Frequent blocking of social networks and individual online media websites only suggests that such a decision was being devised for a long period and, as a result, strengthened the state’s digital regulatory mechanisms.
In early 2019, the government decided to go further. The State Antimonopoly Service was developing a bill to increase prices for the Internet data and mobile communications. According to the new requirements, the cost of mobile communication has doubled and the cost of 1 gigabyte of Internet has tripled ($ 6.5).[16] It has already been noted that in 2019, the authorities actively talked about increasing the budgetary revenues by 10% annually.
The decision to increase the cost of the Internet prompted many to think that the state is trying provide itself with income by all means, which is obvious, especially referring to tax increases and new duties in early 2019. However, it is dubious that the increase in prices for the Internet and mobile communications in general can somehow contribute to the enrichment of the budget. In this case, the strengthening of income items of state enterprises most likely comes to the fore, in particular benefiting Tajiktelecom. Here you can see how decisions are already starting to go beyond ordinary taxation.
The authorities justified such a policy with a desire to improve the quality of communication, which caused huge doubts both among the expert community and among the population. Social media was full of criticism of the price increases. As a result, President Emomali Rahmon overturned this decision by his personal decree.[17] This case is one of the few that demonstrates, firstly, the adoption of dubious decisions and, secondly, how these dubious decisions may not pass due to the timely and active position of the population. However, it is most likely that tax duties are still a priority for the authorities, which allowed the authorities to curtail the failed campaign, which was not important for the state budget in the first place.
However, this does not mean that the government is not trying to use the telecommunications sector for budget replenishment. In 2016, Tajik government adopted a resolution “On the Procedure and Requirements for Connecting to Telecommunication Networks and Rendering Services Related to Them.”[18] According to it, all citizens are required to re-register their SIM cards with new plastic passports (ID-cards) until August 2019. The bottom line was the following: everyone who had old-style paper passports at the time this decision came into force had to change it for a plastic passport. Moreover, the requirements also extended to citizens whose paper passports had not yet expired. For your information – the cost of a plastic ID-card is about $ 5.
This decision is an example of poor planning. The employees of the passport offices were unable to process requests from citizens and issue new passports on time, often delaying issuance by 1-2 months. Due to the risk of disrupting the deadline, the authorities decided to postpone the mandatory re-registration of SIM cards until February 2020, and then, for exactly the same reasons, again moved the deadline until February 2022.[19]
With regards to foreign companies
Foreign companies providing services in Tajikistan also occasionally face new legal requirements implying additional expenses. One such example is the introduction of the National Processing Center (NPC) for money transfers from abroad at the end of 2019.[20] According to that, money transfer operators need to open an account with the National Bank in order to be allowed to work in Tajikistan.
The government explained the introduction of new system by the need for an insurance fund in case of bankruptcy of such companies. Therefore, all remittances sent to Tajikistan must be done through the NPC.[21] Due to this, money transfer companies will be forced to raise prices for their services in order to cover the costs of joining the NPC. For the authorities, this will increase revenues to the state budget.[22]
Most importantly, the remittance market is particularly beneficial, since this is the only available tool for labor migrants to send money to their families in Tajikistan. Despite the fact that remittances provide both the country’s GDP and the state budget, Tajikistan introduces its own rules on the market in order to fully drain this source of profit. The introduction of the money transfer aggregator faced poor planning. After the launch of the NPC, there were many reports that people could not receive the money transferred to them.[23] In face, not all companies agreed to cooperate with NPC, including Zolotaya Korona, which accounts for about 80% of all transfers of Tajik migrants.
The beginning of 2021 in Tajikistan was marked by the introduction of a long awaited and often discussed tax for IT companies. The country’s Tax Committee proposed the new custom publicly known as «the Google Tax» back in 2017.[24] Naturally, the list of potential taxpayers was not limited to Google, but also included Facebook, Aliexpress, Microsoft, Apple etc. The representatives of the Tax Committee did not provide arguments concerning national security, “gray traffic” or dubious transactions – they solely emphasized it as the opportunity for enriching the budget, as if avoiding unnecessary sentimentality.[25]
Over the next years, the committee tried to actively promote this bill, citing Russia, where the tax on profits of digital companies brought about $ 1.2 billion to the budget.[26] Finally, at the very beginning of 2021, amendments to the Tax Code were approved, obliging foreign IT companies to pay 18% VAT.[27] That is, services such as online advertising, hosting, mobile applications, cloud services and others will henceforth be taxed if provided by a foreign company.[28] The natural course of events will be an increase in the price of all the mentioned services for users in Tajikistan, as companies will have to make a mark-up due to the new tax.
But what about the tax reform?
The state desires new sources for taxation, while promoting the reform of the tax code, which began in 2020. At the very beginning, the reform had great potential, since entrepreneurs were involved in the development. Local businesspersons could freely put forward their proposals for the upcoming reform.[29] Currently very little information is being disclosed on the ongoing discussion of the amendments. It is known, for example, that the new version of the code will contain more articles, which sweeps aside all possible expectations for the simplification of the tax system.[30] At the same time, however, it was reported that the number of basic taxes will be reduced from 11 to 7 with other certain types of taxes to be liquefied.[31] It was also originally planned to issue an updated code by September 2020.[32]
Now, the adoption of amendments to the code is constantly and indefinitely postponed. At the same time, the authorities are introducing the already mentioned Google Tax. The fact is that budget planning with an annual increase in revenue by 10% forces the authorities to introduce new tax obligations. Nevertheless, until they find ways that can compensate for all the tax losses that will occur after the adoption of the new code, the government will keep pulling off the Tax Reform. For now the first step is made with “the Google Tax”. Tt is quite possible that there will be new tax duties or an increase in existing taxes. In particular, if there are rumors about compulsory health insurance, which only indicates that the search for new sources of income for the state continues to exist.
Conclusion
In the CIS, Tajikistan is one of the most economically undeveloped countries. Low incomes of the population do not allow to fully provide the budget with tax payments, despite the high overall tax burden. The budget suffers from a deficit and the power of Tajikistan for the lack of resources within the country, uses people’s funds for financial enrichment and takes control of profitable sectors of the economy.
Today there are no signs that this trend will fade anytime soon. The government of the country will continue to pursue a similar policy and find new aspects of the population’s life to impose duties on them. Under the government, there are no indulgences to solve the problems of tax shortfalls. The ongoing reforms serve only as a political instrument, as new taxes continue to be introduced in place of those that were lifted.
It is also noticeable that the authorities are introducing various requirements not only for the country’s population and entrepreneurs, but also for external actors operating in the most profitable industries. The digital sphere in particular is attracting increased attention from government agencies. Moreover, it acts as a source of profitability for the state budget and the prosperity of individual state institutions, but also as the space in need of control from the state (from the point of view of the state itself).
The planning for such a policy is poor. Often, the introduction of new taxes and additional regulations on the market leads to negative consequences for the population. As a result, solving the problems of budget deficit through such solutions not only fails to solve the existing budget-related shortcomings, but also creates even more challenges to cope with. In the end, the prioritization of the state’s profitability should give way to increasing the profitability of the population as the most important goal. Securing this goal will eventually satisfy the needs of both parties.
This material has been prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project. The opinions expressed in the article do not reflect the position of the editorial board or the donor.
[1] PWC, Paying Taxes 2020, https://www.pwc.com/gx/en/services/tax/publications/paying-taxes-2020/overall-ranking-and-data-tables.html
[2] Тома. А, 25.11.2019, Пенсии в Центральной Азии: борьба за выживание (инфографика), CABAR.Asia,
https://cabar.asia/ru/pensii-v-tsentralnoj-azii-borba-za-vyzhivanie-infografika
[3] PWC, Paying Taxes 2020, https://www.pwc.com/gx/en/services/tax/publications/paying-taxes-2020/overall-ranking-and-data-tables.html
[4] Asia-Plus, 22.10.2020, Недобор налогов – недобор бюджета. Госказна Таджикистана недополучила около $55 млн., https://asiaplustj.info/ru/news/tajikistan/economic/20201022/gosbyudzhet-tadzhikistana-za-devyat-mesyatsev-etogo-goda-nedobral-okolo-55-mln
[5] Sputnik.tj, 19.12.2019, Налоговый недобор: госбюджет Таджикистана не получил 165 миллионов долларов, https://tj.sputniknews.ru/country/20191219/1030420541/tajikistan-gosyudzhet-nalogi.html
[6] Министерство финансов Республики Таджикистан, Гражданский Бюджет 2020, http://minfin.tj/downloads/%D0%B3%D1%80%D0%B0%D0%B6%D0%B4%D0%B0%D0%BD%D1%81%D0%BA%D0%B8%D0%B9%20%D0%B1%D1%8E%D0%B4%D0%B6%D0%B5%D1%82-ru.pdf
[7] Asia-Plus, 09.04.2019, В Таджикистане налоги будут увеличиваться ежегодно на 10%. За счёт кого?,
[8] Regnum, 06.02.2019, Парламент Таджикистана одобрил плату за разрешение на строительство жилья, https://regnum.ru/news/economy/2567341.html
[9] Regnum, 06.02.2019, НДС строительных компаний повысили до 18%, https://regnum.ru/news/2567421.html
[10] Regnum, 06.02.2019, Парламент Таджикистана одобрил плату за разрешение на строительство жилья, https://regnum.ru/news/economy/2567341.html
[11] Fergana, 26.04.2019., В Таджикистане ввели новый сбор для туристов, https://fergana.agency/news/106948/#:~:text=%D0%9F%D0%BE%20%D0%B8%D0%BD%D1%84%D0%BE%D1%80%D0%BC%D0%B0%D1%86%D0%B8%D0%B8%20%C2%AB%D0%90%D0%B7%D0%B8%D0%B8%2D%D0%9F%D0%BB%D1%8E%D1%81%C2%BB,%2450%20%D0%B4%D0%BE%D0%BB%D0%BB%D0%B0%D1%80%D0%BE%D0%B2%20%D0%B2%20%D0%BA%D0%B0%D1%87%D0%B5%D1%81%D1%82%D0%B2%D0%B5%20%D0%B3%D0%BE%D1%81%D0%BF%D0%BE%D1%88%D0%BB%D0%B8%D0%BD%D1%8B.
[12] Regnum, 31.05.2019, В Таджикистане зафиксирован самый большой туристический прирост в мире, https://regnum.ru/news/economy/2639727.html
[13] Asia-Plus, 19.01.2021, Таджикских блогеров обязывают платить налоги с дохода на YouTube, Facebook, Instagram, https://www.asiaplustj.info/ru/news/tajikistan/society/20210119/tadzhikskih-blogerov-obyazivayut-platit-nalogi-s-dohoda-na-youtube-facebook-instagram
[14] Настоящее время, 16.02.2018, В Таджикистане ввели госмонополию на интернет, https://www.currenttime.tv/a/29043619.html
[15] Настоящее время, 25.01.2016, Таджиксике власти берут под контроль интернет, https://www.currenttime.tv/a/27509533.html
[16] Eurasianet, 09.03.2019, Tajikistan: Internet just got way more expensive, https://eurasianet.org/tajikistan-internet-just-got-way-more-expensive
[17] Fergana, 23.04.2019, Рахмон отменил повышение цен на интернет, https://fergana.agency/news/106864/
[18] Постановление Правительства РТ о Порядке и требованиях подключения к сетям электрической связи и оказания услуг, связанных с ними http://www.adlia.tj/show_doc.fwx?Rgn=127322
[19] Radio Ozodi, 15.02.2020, Срок перерегистрации сим-карт в Таджикистане продлен еще на два года
https://rus.ozodi.org/a/30436088.html
[20] Asia-Plus, 02.12.2019, Национальный центр по денежным переводам в Таджикистане заработает уже завтра, https://www.asiaplustj.info/ru/news/tajikistan/economic/20191202/tsentr-po-perevodam-v-tadzhikistane-zarabotaet-uzhe-zavtra-v-rossii-schitayut-chto-eto-ostanovit-potok-deneg-v-respubliku
[21] Национальный Банк Таджикистана, 29.11.2019, Национальный процессинговый центр по денежным переводам без открытия счета, https://nbt.tj/ru/news/491761/
[22] Radio Ozodi, 06.12.2019, НПЦ: забота о народе, надежда на прибыль или перекраивание рынка?,
https://rus.ozodi.org/a/30311180.html
[23] The Open Asia, 09.12.2019, В Таджикистане не работают денежные переводы: Что происходит?
[24] Sputnik.tj, 26.12.2017, Таджикистан хочет взымать налоги с Google, Apple, Microsoft и Facebook, https://tj.sputniknews.ru/country/20171226/1024282362/tadzhikistane-hotyat-vzymat-nalogi-elektronnyh-servisov.html
[25] Ibid
[26] Asia-Plus, 20.12.2019, Google и Microsoft: Стоит ли Таджикистану их облагать налогом?, https://www.asiaplustj.info/ru/news/tajikistan/economic/20191220/google-i-microsoft-stoit-li-tadzhikistanu-ih-oblagat-nalogom
[27] Asia-Plus, 13.01.2021, В Таджикистане утвержден “налог на Google”, https://asiaplustj.info/ru/news/tajikistan/economic/20210113/v-tadzhikistane-utverzhden-nalog-na-google
[28] Asia-Plus, 09.11.2020, Как «налог на Google» коснется пользователей интернета в Таджикистане?, https://asiaplustj.info/ru/news/tajikistan/society/20201109/kak-nalog-na-google-kosnetsya-polzovatelei-interneta-v-tadzhikistane
[29] Таджикское Телеграфное Агентство, 07.02.2020, Бизнесмены Таджикистана предлагают 200 поправок в Налоговый кодекс, https://tajikta.tj/ru/news/biznesmeny-tadzhikistana-predlagayut-200-popravok-v-nalogovyy-kodeks
[30] Radio Ozodi, 14.10.2020, Новый налоговый кодекс: статей будет больше, но налогов меньше,
https://rus.ozodi.org/a/30892362.html
[31] Ibid
[32] Asia-Plus, 18.03.2020, В Таджикистане планируют сократить количество налогов до 7 наименований, https://asiaplustj.info/ru/news/tajikistan/economic/20200318/v-tadzhikistane-planiruyut-sokratit-kolichestvo-nalogov-do-7-naimenovanii