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Fiscal Transition in Kazakstan

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ISBN: 971-561-158-3

Paperback (Pub. Date: 1999)
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Fiscal Transition in Kazakstan provides an assessment of the fiscal situation in Kazakstan in the mid-1990s, focusing on issues of intergovernmental fiscal relations and budgeting. Transition economies have typically found it easier to implement tax reform than revenue-sharing reform because of the policial difficulties associated with the latter. This is true in Kazakstan, which has made much progress in terms of tax reform. But in related areas of budgeting and intergovernmental fiscal relations, practice has hardly advanced beyond the Soviet system. This book describes transition, or lack thereof, in these areas, and makes recommendations for improving the system, including revising expenditure assignments and budgeting, and providing mechanisms for funding local governments that combine greater fiscal discretion with equalization of fiscal capacity. 367pages.

When this book was produced, Kazakstan was spelled without an "h". The country name has since been changed to Kazakhstan.


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Contents

Preface, Contents, List of Tables, List of Figures, List of Textboxes and Abbreviations and Definitions [ PDF: 20kb | 15 pages ]

Executive Summary [ PDF: 151kb | 23 pages ]

Historical and Economic Background
Geographic and Demographic Features
Economic Background
History of Tax Policy
Intergovernmental Fiscal Relations in the FSU
 
Tax Reform
Income Tax
Value-added Tax
Excises
Securities Transaction Tax
Mineral Resources Tax
Land Tax
Property Tax
Vehicle Registration Tax
Administrative Matters
 
The System of Intergovernmental Fiscal Relations
The System
Problems: Meeting Basic Objectives of IFR
Summary of Recommendations on IFR

CHAPTER 1: Overview and Assessment of Fiscal Transition in Kazakstan [ PDF: 241kb | 42 pages ]

Introduction
 
Historical and Economic Context of Fiscal Transition
Historical and Economic Background
Selected Sectors
Selected Economic Issues
Recent Economic Developments
Position of Kazakstan in the FSU
History of Tax Policy
 
Tax Reform
Income Tax
Value-added Tax
Excises
Securities Transaction Tax
Mineral Resources Tax
Land Tax
Property Tax
Vehicle Registration Tax
Administrative Matters
 
The System of Intergovernmental Fiscal Relations (IFR)
Soviet Legacy
Meeting Basic Objectives of IFR
Revenue Sharing and Subventions
Vertical Fiscal Imbalance and Horizontal Fiscal Disparities
Information and Control
Summary of Recommendations on IFR
Expenditure Assignment
Budgetary Process: Formulation Budgetary Process: Execution
Budgetary Process: Control, Audit, and Evaluation
Revenue Assignment
Intergovernmental Grants
Timing

CHAPTER 2: The Basic Objectives and Principles of Tax Policy for Kazakstan [ PDF: 113kb | 15 pages ]

Introduction
 
Revenue Adequacy
Transition and the Need for Revenue
Transition and Revenue Potential
 
Economic Neutrality
Principles of Neutral Taxation
Achieving Neutral Tax Policy
 
Encouragement of Saving and Investment
 
Low Statutory Rates
Benefits of Low Rates
Implications for Policy
 
Fairness
Horizontal Equity
Vertical Equity
Vertical Equity in Kazakstan
Implications for Policy
 
Simplicity
Simplicity for Enterprises
Simplicity for Individuals
Proliferation of Taxes

CHAPTER 3: The New Tax Code of Kazakstan [ PDF: 260kb | 53 pages ]

Introduction
Income Tax
General Provisions
Provisions Relating Primarily to Individuals
Provisions Relating to Taxation of Business Income
Value-added Tax
Excises
Securities Transaction Tax
Mineral Resources Tax
Statutory Provisions
Comments
Other Problems
Local Taxes
Land Tax
Property Tax
Vehicle Registration Tax
Taxes for Special Fund
Social Security Taxes
Road Fund
Administrative Matters
Protecting the Tax Code: Reconciling
Stability with Revisions
Appendix

CHAPTER 4: Quantitative Fiscal Analysis in Kazakstan [ PDF: 166kb | 23 pages ]

Introduction
Revenue Forecasting and Estimation: Central Government's Current Practices
Revenue Forecasting
Revenue Estimation
Revenue Forecasting and Estimation: Subnational Government's Current Practices
Revenue Forecasting
Revenue Estimation
Inputs to the Development of Quantitative Fiscal Analysis Capability
Models for Revenue Forecasting and Estimation: Recommendations
Spreadsheet Models
Aggregate Regression Models
Microsimulation Models

CHAPTER 5: The Assignment of Expenditure Responsibilities [ PDF: 230kb | 44 pages ]

Roles of the Public and Private Sectors in the Economy
Current Assignment of Expenditure Functions
General Principles of Expenditure Assignments
Critical Role of the Efficiency Criterion
Objectives of Redistribution and Stability
Best Pursued by the Central Government
No Single Best Assignment
Importance of a Clear and Stable Assignment
Problems with Current Expenditure
Assignments and the Need for Reform
Lack of Formal Assignment
Inefficient Assignments
Ambiguity in Certain Assignments
Sharing of Responsibilities
Capital Investment Responsibilities and Borrowing
Need to Redress the Assignment of Capital Investment Responsibilities
How to Address the Lack of Financing for Local Capital Infrastructure
Current and Draft Legislation on Government Borrowing
Divestiture of Social Responsibilities by Enterprises
Social Security System
Pensions
Medical Insurance
Vertical and Horizontal Fiscal Imbalances
Vertical Imbalances
Horizontal Fiscal Disparities
Are Subnational Expenditure Needs Covered?
Will Subnational Governments Provide Minimum Desired Service Levels?
Need for Privatization and Greater Efficiency in Public Expenditures at the Subnational Level Recommendations
Formal Assignment of Expenditure Responsibilities
Reassignment of Selected Expenditure Responsibilities
Reassignment of Capital Investment
Responsibilities Provision for Capital Investment at the Subnational Level
Continuation of Current Efforts to Establish a Coordinated National Policy to Facilitate the Divestiture of Social Responsibilities by State Enterprises
Minimum Standards
Sectoral Reviews in Key Areas
Political and Administrative Organization Reforms

CHAPTER 6: Budgeting Issues [ PDF: 244kb | 47 pages ]

Relevance of Budgetary Discretion to Decentralization Policy
Budget Process, Extent of Budgetary Autonomy, and Role of the Budget
Budget Preparation: Issues and Needed Reforms
Process: Interdependency of Budgets and the Role of Negotiation
Other Problems and Issues in Budget Preparation
Inadequate Capital Budgeting
Recommendations on Budget Formulation
Budget Execution: Issues and Needed Reforms
Process of Budget Execution
Main Problems in Budget Execution
Recommendations on Budget Execution
Budget Control, Audit, and Evaluation: Issues and Needed Reforms
Background on Budget Compliance
Need to Rebuild Internal Compliance
Recommendations for Internal Audit Reform

CHAPTER 7: Tax Sharing and Subventions [ PDF: 161kb | 20 pages ]

The Present System
Central Government/Oblast Tax Sharing and Subventions
Oblast/Local Tax Sharing and Subventions
Problems with the Present System
Tax Assignment Alternative
Objective of Tax Assignment: Marginal Sources of Own Revenue
Impediments to Tax Assignment
Potential Horizontal Fiscal Disparities
Two Models of Intergovernmental Fiscal Relations

CHAPTER 8: Tax Assignment [ PDF: 232kb | 44 pages ]

Considerations in Tax Assignment
Role of Benefit Taxes in Tax Assignment
Locational Issues
Distributional Issues
Macroeconomic Stability
Methods of Tax Assignments
Independent Legislation and Administration
Tax Sharing
Tax Surcharges
Synthesis: Adding Grants
Why the Present Rules Cannot Underpin a New System of Tax Assignment
Enterprise Income Tax
Value-added Tax
Excises
Surcharge-Based System of Tax Assignment on Potential Abuses
Individual Income Tax
Enterprise Income Tax
Excises
Value-added Tax
Use of Formulas
Sources of Revenue for Local Governments
Summary

CHAPTER 9: The Design of Intergovernmental Grants [ PDF:144kb | 15 pages ]

Current System of Intergovernmental Grants
Objectives of Grant Policy
Relevance for Kazakstan
Proposed System

CHAPTER 10: Evolution to a New System [ PDF:130kb | 11 pages ]

Stage 1: Rationalization of Tax-Sharing Rules
The 1996 Changes
Stage 2: The Shift from Tax Sharing to Tax Surcharges
Equalization and the Representative Tax System

Postscript [ PDF:61kb | 3 pages ]

References [ PDF:107kb | 7 pages ]


All rights reserved

First published 1999

The views and interpretations in this Report do not necessarily reflect those of the Asian Development Bank.

ISBN 971-561-158-3
Publication Stock No. 00067P

© 2009 Asian Development Bank

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