Kazakhstan’s industrials union sides with small-scale peers in queries with public services

Butchers, bakers, candlestick makers: the taxman always rings twice

If Kazakhstan remains far from being a tax haven for people with a lot more money than one could possibly spend, favourable taxation measures have been taken to spare those who have trouble making ends meet. Whereas on legislative levels such measures have been well-meant and indeed given temporary relief to the country’s fledgling middle class, on executive levels they have been abused to sometimes absurd proportions. Kazakhstan’s national association for industrials and other employers Atameken has started to take care of its tiny peers by campaigning at top government levels first of all to keep measures to spare the little ones coherent and furthermore see to it that they are appropriately put into practice.


Kazakhstan’s industrials union sides with small-scale peers in queries with public servicesFor a period of four years, from 2007 to 2010, individual entrepreneurs in Kazakhstan enjoyed an emergency measure to shield them from the worst consequences of the impact of the global financial crisis on Kazakhstan, through a discount on income tax of 70 per cent for the period. The measure was taken for a limited period and has not been prolonged – meaning that over the past year many small businessmen have seen their balance sheets worsening to considerable extents. But that is not all: according to Atameken, in particular in the central-east and the southeast of Kazakhstan, tax officials have added the 70 per cent discount over the previous years to the tax bill over 2011 retrospectively. For retail providers of dairy products, bread and pastry and meat products as well as holders of small workshops, all with less than ten people on their payroll, the abuse threatens to push them out of business and leave consumers to large-scale, more expensive suppliers.

It is just one example out of many concerning arbitrariness – often to civil servants’ personal advantage – practiced by administrative services in Kazakhstan. For consumers and individual citizens in general there is an ombudsman, but small businesses often see themselves confronted with a vacuum when it comes to speaking up on abuses with a chance of action being taken. Parliaments as well as provincial and municipal councils often ignore problems between public services and, especially smaller, enterprises and individual businessmen or are not equipped with the appropriate authority to intervene in an effective manner on a case-to-case basis. It is in relation to this communication gap from which not just Kazakhstan and other former Soviet republics suffer but which represents a structural problem in many western societies as well, that Atameken appears to have decided to step in.

To help authorities realise the restricted abilities of entrepreneurial taxpayers to absorb over-complicated regulations and obligations and help the taxpayers to be able to live up to reasonable requirements, Atameken has put counsels on the table in consultancies with state officials and government representatives for amendments and additions of more than 60 clauses in the tax code, over 20 ones in the law o administrative violations and 34 in relation to the law on customs and duties. The overall aim is to ensure that the system works smoothly and effectively without inflicting undue damage to any party involved. All civil servants hired for that purpose should be held responsible whatever their rank and file for any abuses either committed by them or allowed for others to commit.

But such punitive measures are not considered enough to create an understanding society, the Union argues. What is also needed for this is the build-up of an administrative and legal expertise, in order to secure integrity on both sides of the line that marks the distinction between private and public sectors. This should also enable the authorities to provide the pubic with appropriate, comprehensive and comprehensible information concerning the rights and duties of everyone involved in either party of the game. This method, as Atameken’s representatives argue, should also bring substantial progress in what is often dubbed “combating corruption” in government terminology. This terminology could be considered as well-meant as it appears to be misleading.

The question remains how to put the government’s much-vowed pledge to “combat corruption” into feasible practice. Both in proclamations and concrete measures, the term is often ill-defined. Corruption in the proper sense is a practice in which the initiative is normally (though not definitely) on the side of the client targeting the executive official (or sometimes even the legislator). The client wants the official to overlook deliberately but discretely any shortcoming or violation of regulations on the client’s side by offering a bribe – which, in case accepted, becomes the habeas corpus of the act of mischief. If the initiative is on the side of the official, who is demanding money or any other “favour” over the counter not because the client has any shortcomings but just to do what he (the official, that is) has to do anyway it becomes extortion. If the official either discovers or fabricates a violation or shortcoming on the side of the client and offers to overlook it against any form of bribe, it becomes straightforward blackmail.

Support for individual and smaller-scale entrepreneurs remains high on the agenda of Atameken, in view of the common interest they share with the large-size industrial class of Kazakhstan in keeping relations between the public and the private sectors serene. “The National Economic Chamber of Kazakhstan Atameken Union asks the government to allow the money accumulated in Kazakhstan’s National Fund to be used for lending to small and medium enterprises (SMEs),” Interfax on February 22 quoted the steering chair of Atameken Ablai Myrzakhmetov as telling a Union board meeting. “We propose that the government should allocate part of the National Fund’s resources to banks to be used for lending to SMEs in the non-resource sector.” At the same meeting Union supreme chair Timur Kulibayev was quoted by the agency as professing that “…one has to choose between engaging in politics and business” – in Interfax’s words. “Businessmen are by definition an active group within the society,” Kulibayev reportedly told journalists. “They are ready to take the responsibility and move forward, but I do not think anyone should mix business and politics. One has to choose either. I do not exclude that some businessmen may want to play a more active part in the political life of our country. I wish them good luck.”

For Timur Kulibayev, who is married to President Nursultan Nazarbayev’s second daughter, wisdom has come with experience. He took on a career in state-owned enterprise after his studies – as his biographic summary published in Wikipedia reads. In March 1999 he became the President of CJSC National Company for Oil Transportation “KazTransOil”. From May 2001 till February 2002 he was the General Director of CJSC National Company “Oil and Gas Transportation” (created on the basis of “KazTransOil” and “KazTransGas”). From February 2002 till October 2005 he was the First Vice-President of JSC NC “KazMunayGas”, a merger of CJSC NC “KazakhOil” and CJSC NC “Oil and Gas Transportation”. After his resignation from the post in “KazMunaiGas”, he initiated the foundation and subsequently chaired the Kazakhstan Association of Oil, Gas and Energy Sector Organizations Kazenergy which unites major national and foreign companies operating in the energy sector of Kazakhstan.

Simultaneously Mr. Kulibayev became part-time Adviser to the President of the Republic of Kazakhstan. In 2005-06 and 2007-08 he combined activity in the public sector with the management of his own private business. As of late 2008, he found himself in the position of deputy president of the State Welfare Fund Samruk-Kazyna, and thereby president of various state-controlled enterprises on its behalf. Last year, he was promoted to Samruk-Kazyna’s president – only to step down and henceforth opting for private business only following the hapless police crackdown on strikers on the peninsula of Mangistau in the remote southwest of Kazakhstan. His current property includes, together with his wife. Control over Kazakhstan’s leading Halyk Savings Bank, the inheritor of Kazakhstan’s branch of the All-Union Savings Bank which used to be the Soviet monopoly.

A last commitment to overall socioeconomic and business climate improvements for Kazakhstan pushed for by Atameken is the quest to “remove administrative barriers” as it has been put diplomatically by the powers-that-be and their corporate interlocutors in recent years. At a recent business forum, metallurgy industrialist Rayimbek Batalov noted that in Kazakhstan there are still more than 400 different entrepreneurial licenses with in total well over a thousand different packs of paperwork to be filled in by applicants – big or small. And, according to the speaker, there is little sign of change for the better/ “The moment in one business sector procedures show signs of being reduced, the reduction pops up in other sectors in the form of increases of formalities and other administrative requirements,” Mr. Batalov was quoted as observing in an Atameken press report. “We want legislation to be consistent, with any law applicable to one sector being in compliance with all other sectors. Only this can make the general public understand what legislation is really about.”