AmCham Azerbaijan and State Tax Service ...

On October 26, 2023, a tax conference on "Tax Transparency: Achievements and Challenges" was jointly organized between the American Chamber of Commerce in Azerbaijan (AmCham Azerbaijan) and the State Tax Service (STS) under the Ministry of Economy of the Republic of Azerbaijan. The event brought together about 150 participants, including representatives of AmCham member companies and government officials.

The conference covered essential topics such as using modern tools to enhance tax transparency, combatting the shadow economy, the role of modern retail advancements in the application of tax reforms, and etc. 

Opening the event, Executive director of AmCham Azerbaijan Ms. Gulnara Aslanbayli, underscored the significance of the 8th joint tax conference, which coincided with the 100th anniversary of the birth of the national leader Heydar Aliyev. She emphasized that this conference played a pivotal role in fostering a constructive state-business dialogue, building mutual trust, and enhancing public cooperation. She also highlighted the prevailing environment of productive collaboration and effective relations between the State Tax Service and AmCham Azerbaijan.

Ms. Narmin Aslanova, Chairperson of the AmCham Tax and Customs Committee stressed that extensive discussions had been conducted among the Chamber's members regarding proposed changes to the Tax Code. She emphasized that these conversations were instrumental in building mutual trust and understanding between businesses and the government. 

Afterwards, Mr. Ilgar Mehti, First Vice-President of AmCham Azerbaijan, emphasized the increasing responsibilities shared by the state and the business community. He noted the crucial role of such meetings in preparation of the "White Paper" prepared by the Chamber. Mr. Mehti also emphasized that the business community advocates for a balanced tax policy. 

Mr. Orkhan Nazarli, Head of the State Tax Service (STS), expressed his deep appreciation for the strong and productive business relationship between the STS and AmCham Azerbaijan. He highlighted the significance of the issues addressed in AmCham's "White Paper" concerning taxation, emphasizing that many of the concerns raised in the previous report have already been successfully resolved.

During the event, Mr. Nazarli provided insights into the structural changes within the State Tax Service. He revealed the establishment of a new unit dedicated to the analysis of taxpayer risks and monitoring, as well as the creation of an Ombudsman's office. He assured participants that these developments would enhance the STS's ability to address appeals and complaints in a more effective manner. Mr. Nazarli shared that the current Tax Administration structure is organized based on taxpayer classification and geographic regions. However, he announced future plans to transition to a functional area-based management approach. This shift will lead to more unified tax policy and administration, fostering transparent relationships between the fiscal authority and taxpayers.

He also emphasized the positive outcomes in fiscal transparency indicators, noting that the growth rate of tax revenues exceeds the nominal growth rate of GDP by 7.7 percent. Mr. Nazarli underscored the government's keen interest in economic growth, entrepreneurial empowerment, and the establishment of a stable income system. He specifically mentioned the potential for micro-entrepreneurs to evolve into small businesses and, subsequently, medium-sized enterprises, leading to significant improvements in the economy. Mr. Nazarli confirmed the tax policy's commitment to supporting this process. Furthermore, he highlighted the upcoming changes in tax policy, initiatives to promote taxation in specific segments, and the application of tax instruments to eliminate unfair competition. He also revealed the positive approaches awaiting business entities in tax administration.

Mr. Nuran Karimov, managing partner of "Deloitte Azerbaijan" company, said that serious changes have been observed in the direction of reducing the "shadow economy". It was emphasized that the creation of a database with open register access for business entities can contribute to the process of selecting counterparties, the possible positive effects of tax and capital amnesty on the sustainability of transparency, and the importance of evaluating the possibilities of transition to the universal declaration system in the future.

Mr. Nijat Imanov, Head of the Tax Policy Department at the STS, provided insights into the changes envisaged in the Tax Code for the upcoming year within the budget and tax policy. He emphasized that the government's top priorities are reducing the tax burden on businesses, promoting entrepreneurial activities, and alleviating the tax burden on the population through social benefits. Expanding the tax base and enhancing tax control mechanisms and administration are central to the strategy. The overarching goals of the tax policy continue to be supporting businesses, optimizing tax burdens, and minimizing risks. Mr. Imanov also mentioned the extensive discussions have taken place with business entities to ensure broad consensus on these changes.

Thereafter, Ms. Natavan Ibrahimova, Director of the "Oba" Market Chain, delved into the role of "Modern retail" in the application of tax reforms. 

In her presentation, Ms. Arzu Hajiyeva, Tax Partner at "EY Azerbaijan," addressed the need for transparency in economic transactions, discussing both the existing opportunities and challenges in this field. She also shared insights on approaches related to managing high-risk taxpayers. 

Next speaker Mr. Rashad Abbasov, Head of the Tax Group at "NEQSOL Holding Azerbaijan," emphasized the importance of tax transparency and the necessity of maintaining a balance between tax transparency and tax enforcement. 

Another tax expert, Ms. Gunel Sadiyeva, Tax Director at "PWC Azerbaijan," discussed the role of trust in increasing transparency, drawing from results obtained through surveys conducted among the taxpayers.

Furthermore, Mr. Elshan Rahimli, Chief of the General Department of Economic Analysis and Accounting control at the STS, provided valuable insights into the progress made in reducing the "shadow economy." Mr. Rahimli discussed notable achievements in enhancing transparency within the economy, including growth indicators in the non-oil sector, turnover levels, the active taxpayer base, and the increasing number of labor contracts. Notably, he emphasized that voluntary compliance during the period of January to August 2023 exceeded 95 percent of total receipts.

To sum up the event, Mr. Orkhan Nazarli, shared his thoughts on the proposals and issues raised during the conference presentations and speeches. He offered contextual insights into the State Tax Service's overarching perspective.

At the end of the conference, Samira Musayeva, Deputy Head of the STS, addressed numerous questions posed by members of AmCham Azerbaijan. She also highlighted several positive approaches that can benefit businesses.

Th conference served as a valuable platform for shedding light on the significant progress made in enhancing transparency, encouraging voluntary compliance, and strengthening the partnership between government entities and the business community.

Click to see the highlights from the Conference.