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In other words, according to journalists from the media portal, Kazakhstan is on the brink of a budget crisis caravan.
We already know how to spend money well, but we don’t know how to make money yet. Therefore, the Ministry of Finance and the Ministry of Economy are constantly looking for new sources of taxation.
AIFC may be one such source – Astana International Financial Centre. The Ministry of National Economy proposed to tax dividends received from AIFC investments.
To be honest, who believed that AIFC could make money and attract billions of dollars in investment? I didn’t believe it. Yes, like most Kazakhs. But the project was a success!
AIFC exchange AIX recently reported its results for the first half of 2024. Thus, trading volume in the first six months of 2024 increased to $707 million, a five-fold increase from $140 million in the first half of 2023. The full-year 2023 trading volume was $582 million.
The official AIX list includes 184 securities from 111 different issuers. The exchange attracted 44 new issuers.
Since its inception, the exchange has raised $4.5 billion, with $471 million in equity capital raised.
AIX has 57 trading members, 27 of which are foreign companies from Europe, the Middle East and China.
More than 1.75 million Kazakhs AIX Central Securities Depository (AIX CSD) investment accountTen global custodians have sub-accounts in AIX CSD.
But AIFC is more than just the AIX exchange. It is a financial center with its own full-cycle infrastructure and conditions for business activity. The territory is 1,600 hectares, the complex has 8 buildings, and the total area is 72,000 sq. m. On the territory, AIFC institutions and their participants are not subject to Kazakhstan legislation and operate within the framework of British law.
There are several international financial centers (IFCs) in the world – concentrations of commercial and financial infrastructure that are of global importance for the global and regional macroeconomy. These cities include London, New York, Zurich, Frankfurt, Shanghai, Tokyo and Hong Kong. A few years ago, Russia announced their intention to create the same MFC in Moscow. But it was too late: Astana took this place in our region. Now the Russian MFC will have to compete with the AIFC, And start from scratch. That’s why the project remains on paper.
One of the goals of the AIFC is to close transit flows within the Eurasian Economic Union. If this plan succeeds, Kazakhstan will be able to receive more than $5 billion in transit funds. $5 billion is not too much for any country.
The entire center operates in accordance with the Constitution of the Astana International Financial Center (Astana International Financial Center Law)About the International Financial Center “Astana” – ILS “Adilet” (zan.kz)) from 2015. The law also exempts all AIFC participants from corporate income tax (CIT) on income derived from the provision of financial services within the AIFC. This includes Islamic banking, insurance, investment, brokerage services, and provision of legal, accounting, consultancy and accounting services to other AIFC members. Therefore, the desire of multinational corporations to tax the income of AIFC participants is, to say the least, confusing.
“The whole point of the AIFC Constitution is That Tax benefits for center participants will last until 2066. That is why AIFC has developed so rapidly in recent years. With stable taxation, a large number of foreign investors came to Astana. Today, AIFC is so noisy that even co-working spaces cannot be found. This is for you: Multinational companies announced that they want to include AIFC in the constitution, abolish benefits and impose a 5% tax on income– In an interview with Caravan Daniyar Temirbayev, Chairman of the Minority Shareholders Association (QAMS). – The problem is not the size of the tax rate. The problem is to maintain the principle of tax stability. Then it is necessary to say at the highest level that there is no stability on the territory of the AIFC. And you can change the rules at any time. This is scary. The President of Kazakhstan, Kassym-Jomart Kemelevich, is currently actively attracting investments to Kazakhstan. He regularly invites investors to the AIFC at all business forums. But at the ministerial level, there are interesting proposals. I am sure that multinationals do not take into account the long-term damage to the image of Kazakhstan. Therefore, if this tax amendment is adopted, it will undermine confidence in the country. The logic here is simple: even if you set the tax rate below 0.1%, what prevents you from raising it to 20% tomorrow? “
Funds operated by the AIFC have offices in Dubai, Singapore and other financial centers. Nothing prevents them from closing their offices in Astana and moving to another country. This will be a minor problem for them. But the funds will leave Kazakhstan. Experts are sure that with them will come tax revenues, which in one way or another go into the state budget.
The AIFC commented on the situation as follows: “Kazakhstan’s securities market is small by world standards, but is growing steadily May become less competitive Allow issuers to raise funds in foreign markets of their choice. As the world competes for capital and investment, we must put legal stability and the protection of the rights of businesses and investors first.”
Now Tashkent is actively following in Astana’s footsteps. The idea is not new. Uzbekistan cannot yet boast the required economic size. Not all Uzbek banks have a credit rating. But Tashkent purposefully attracts foreign investments and boosts the economy. Therefore, the Ministry of National Economy of Kazakhstan has decided to cancel tax benefits for the following enterprises: International Federation of Accountants Would make a great gift for neighbors.
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