World Bank Recommends Kazakhstan to Raise VAT: What It Means for the Economy
Analysts suggest tax reform amid potential economic risks
The World Bank has warned that Kazakhstan faces declining oil prices, a growing budget deficit, and a weakening tenge. As a solution, it proposes a tax system overhaul.
What Are the Proposed Changes?
- Increase VAT (currently 12%), as it is lower than in similar economies.
- Introduce a progressive income tax instead of the current flat 10% rate.
- Eliminate inefficient tax exemptions for businesses.
- Raise excise taxes on fuel, tobacco, and alcohol.
Why Is the World Bank Suggesting This?
Experts at the World Bank predict:
- Kazakhstan's budget deficit will reach 3.1% of GDP by 2025.
- Average oil prices will drop to $72 per barrel.
- Kazakhstan’s labor tax revenue is only 1.3% of GDP, one of the lowest in the world.
What Are the Risks?
- Higher consumer prices due to increased VAT.
- Greater tax burden on businesses and citizens.
- Inflation risks due to increased government spending.
What Do Economists Say?
Experts warn that Kazakhstan must urgently diversify its economy, or reliance on oil and public debt could lead to serious financial challenges.
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