Government Remains In The Dark About Kazakh Shadow Economy

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Kazakhs registered murky money and undocumented property amounting to some KZT5.7tn (€16.9bn) by the end of last year under the government’s capital amnesty programme, but this merely scratches the surface of the country’s true shadow economy.

The Kazakh government first approved a capital amnesty law in 2014, enabling Kazakh citizens, ethnic Kazakhs moving home from abroad and those holding residence permits to register property and money taken out of legal circulation as cash or cash-equivalents. The law was introduced in an effort to bring greater transparency to the country’s capital flows by clamping down on money laundering. More specifically, Astana hoped to achieve two goals: reduce the size of the shadow economy and legalise $50bn worth of money and property.

However, this effort flopped, with the Central Asian country persuading residents to register just KZT84bn ($25.4mn) by November 2015. Even after the government amended the law at that time to significantly simplify the legalisation process, assets totalling a liitle over a third of the $50bn were registered by the deadline of the end of December 2016.

The authorities estimate they will gain annual tax revenues worth KZT200bn from the registered property and capital. Legalised commercial real estate alone should result in an annual KZT800mn in property tax money. The return of KZT4.1trn of cash and cash equivalents back into legal circulation is expected to annually generate KZT150bn in taxes.

Yet official figures indicate the programme registered equivalent to 10% of Kazakhstan’s GDP, whereas the post-Soviet nation’s shadow economy is estimated at 30%-40% of GDP, based on estimates by independent analysts.

Some analysts have hinted that the programme was in fact designed with an entirely different purpose – to clean dirty capital and property belonging to the Kazakh elites.

“In my opinion, the elites are trying to guarantee the safety of their wealth,” human rights defender Yevgeny Zhovtis said when the amnesty law was originally passed. Senior officials and investors acquired assets during privatisations in the 1990s in very untransparent processes that were entangled in corruption.

Under the official rules of the capital amnesty programme, property acquired via crime and corruption could not be amnestied, but there were few safeguards put in place stopping this. Bribery and corruption are rampant in Kazakhstan, and the government is ineffective in curbing it.

Read Full Article: bne IntelliNews