2013年-IMF国际货币组织全球_Kyrgyz_Republic_Selected_Issues_47页_1mb

Kyrgyz Republic: Selected Issues Summary

Core Content Overview

This document provides an analysis of tax policy, monetary policy transmission channels, exchange rate assessment, and business environment and governance in the Kyrgyz Republic, prepared by the IMF staff as background for policy consultations. The report is based on information up to May 22, 2013, and highlights key tax policy reforms, incentives, and challenges.

A. Tax Policy in the Kyrgyz Republic

Background

• The Kyrgyz Republic aims to consolidate its finances and improve revenue performance.
• Tax policy reforms and improved tax administration are crucial for sustaining revenue growth.
• A detailed tax policy assessment was conducted in 2009 under IMF technical assistance.
• In 2011, IMF staff discussed tax measures to increase revenues.

Main Characteristics of the Tax Regime

• New Tax Code (2009):
  • Reduced the number of taxes from 16 to 8.
  • Lowered the VAT rate from 20% to 12%.
  • Introduced a turnover (sales) tax to replace retail sales tax, road tax, and emergency funds.
  • Established five special tax regimes (mandatory patent, voluntary patent, simplified single tax, contract-based tax, and free economic zones).
  • Introduced a new gross revenue tax for gold-mining companies.

Tax Performance (2006–2011)

• Total tax revenue increased from 21% to 24% of GDP.
• VAT was the main revenue source, but its performance declined in 2009 due to rate cuts, though it improved slightly in 2011.
• CIT and PIT revenue increased significantly, reaching 26% of total tax revenue in 2011.
• Social contributions rose steadily to about 5% of GDP in 2011.
• Excise taxes declined from 5% to 3.3% of GDP due to low rates and inflation effects.
• Customs duties accounted for 11% of tax revenue, but could decline due to trade policy changes.

Key Observations

• The turnover tax negatively impacts competitiveness due to its cascading nature.
• VAT exemptions are widespread and may erode the tax base, especially in the agricultural and residential sectors.
• The patent regimes and tax incentives reduce CIT collections, with many taxpayers outside the regular tax system.

B. Tax Incentives

Existing Incentives

• VAT exemptions are applied to various sectors including agriculture, residential buildings, public utilities, and imported fixed assets.
• Tax holidays are used to attract short-term investment but are not effective for long-term growth.
• Reduced CIT rates are applied to new businesses in remote regions (temporarily for 5 years).
• Investment allowances and tax credits are used but may distort investment choices.
• Accelerated depreciation is considered less harmful than other incentives.
• Free Economic Zones (FEZs) and export processing zones offer tax-free environments but may lead to tax leakage.

Pros and Cons of Tax Incentives

C. Tax Policy Reform Options

Key Reform Priorities

• Eliminate VAT exemptions to broaden the tax base and improve VAT revenue.
• Replace VAT exemptions with targeted social assistance programs to ensure social benefits without weakening the tax system.
• Improve tax administration to increase compliance and reduce evasion.
• Reform the patent regimes to ensure more equitable tax burden distribution and encourage migration to the regular tax system.
• Strengthen the VAT refund mechanism to reduce distortions and improve tax collection efficiency.

Challenges

• Tax incentives can undermine revenue growth and distort investment choices.
• Transfer pricing may be used to shift profits to low-tax regions, reducing tax revenues.
• Specific excises are more predictable but may be undermined by inflation.
• VAT productivity has improved, but the VAT refund mechanism remains weak.

D. Monetary Policy Transmission Channels

• The monetary policy framework in the Kyrgyz Republic is influenced by inflation, monetary aggregates, and exchange rate developments.
• Transmission channels include the interest rate, credit availability, and exchange rate pass-through.
• Barriers to effective monetary policy include weak institutional capacity, low central bank independence, and limited credibility.
• The policy rate has a limited effect on economic activity due to low financial market development and high informal sector participation.

E. Exchange Rate Assessment and Reserve Adequacy

• The real effective exchange rate (REER) and relative prices are key indicators of exchange rate performance.
• Tax revenue is a significant part of international reserves, but the reserve adequacy is affected by trade openness, import/export price growth, and current account deficits.
• Customs duties and VAT are important revenue sources, but VAT refunds are limited.
• Recent reforms include increasing customs duties from 15 cents to 35 cents per kilogram and moving to a price-based valuation system to reduce revenue losses.
• Free trade agreements and custom unions could affect import levels and reserve adequacy.

F. Business Environment and Governance

• The business environment is influenced by tax policy, regulatory frameworks, and governance structures.
• Best practices for development banks include efficient credit allocation, transparent operations, and sound governance.
• The Kyrgyz Republic has low PIT and CIT rates, which are among the lowest globally, potentially limiting revenue generation.

Conclusion and Recommendations

• The Kyrgyz Republic should eliminate unnecessary VAT exemptions and strengthen the VAT system.
• Tax incentives should be transparent, predictable, and designed to prevent abuse.
• The central bank needs to increase independence and improve credibility to enhance monetary policy effectiveness.
• Reserve adequacy should be monitored closely, especially in light of trade policy changes and customs union memberships.
• Tax reforms should aim at targeted social assistance rather than broad exemptions.
• The business environment needs to be reformed to attract long-term investment and reduce administrative burdens.