Monochrome: Uzbek tax reform

Date: Apr 2018

Tax reform is the topic on everyone’s lips in Uzbekistan, with rumours that even Alisher Usmanov’s consultants have been invited to develop the concept. According to the very long tax reform concept, the main objective is to simplify tax administration, lower VAT, remove unclear laws and regulations, abolish certain mandatory payments and generally reduce the tax burden. Of course, the ultimate goal is to use a carrot rather than a stick to bring business out of the shadows.

Earlier this week, Asian Development Bank VP Wencai Zhang visited Kyrgyzstan. After meeting with the Kyrgyz President, Zhang noted that the main sectors with great potential for investment projects are energy, roads, railways and infrastructure. However, it is not clear what specific decisions were made during his visit. We hope that the commitments made did actually go beyond merely a set of declarations.

An airline dispute is rumbling between Uzbekistan and Russia. In short, Tashkent is not willing to open the sky to Russian airlines for additional flights to service the growing influx of tourists to Uzbekistan. A similar dispute has long been taking place in Tajikistan, where local authorities cited parity issues when they cancelled permits for Ural Airlines. Ultimately, of course, it is passengers who suffer.

Kazakhstan’s President Nazarbayev is currently visiting the UAE. The visit has seen the signing of documents relating to several important projects, including: the construction of an integrated gas chemical complex; the purchase of a stake in a polypropylene production plant; the “Morport Aktau” and “Khorgos - Eastern Gate” free trade zones in Kazakhstan.

Kazakhstan's BTA bank is set to start several developer projects in Moscow, including a large 100,000m2 multifunctional centre, a huge aquarium and a residential complex. The total volume of investments will be approximately $700 million. Kenges Rakishev is the main shareholder of BTA Bank, which was previously owned by exiled Kazakh dissident Mukhtar Ablyazov.

Kazakh Railways’ “Digital Railways” project is being implemented in Kazakhstan, with the objective of digitising the entire railway system by 2022. The project will cover almost all processes, from ticket sales and tariff management, to forecasting train-car traffic and route control with the help of machine learning algorithms.

Kazakh MP Askar Bazarbaev is asking why the antitrust committee allowed Kazakhtelecom to purchase a 75% stake in Kcell? With a market share of over 65%, Kazakhtelecom could abuse its dominant position, raise tariffs for consumers and generally dictate market conditions. According to some rumours, the total value of the Kcell deal could be $1.2 billion.

The office of Uzbekistan’s President Mirziyoyev is preparing a very important foreign trade law to support the government’s general policy of replacing individual benefits for particular businesses with benefits for general economic sectors. In addition, current export customs rates are too high, with the entire regulatory framework in need of some serious updating. There is also no adequate classifier of goods, which creates problems during customs clearance. In general, the law will be aimed at stimulating export activity.

A two-day conference on Afghanistan was held in Tashkent this week, with representatives including Russia’s FM Sergey Lavrov, the EU’s High Representative Federica Mogherini, and the USA’s Undersecretary of State for Political Affairs Thomas Shannon. In general, no sensational statements were made, with more typically diplomatic reports of “expressed concern” and “the importance of centripetal forces and the launch of dialogue in a complex geopolitical situation.” Most significantly, President Mirziyoyev’s initiative may result in a permanent platform for Afghanistan issues.

President Mirziyoyev will pay an official visit to India this autumn. India has recently been trying to formulate a more comprehensive strategy for Central Asia, a topic covered in more depth here. Autumn is promising to be rich in travel and meetings, with Vladimir Putin set to pay a state visit to Uzbekistan.

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