2024-04-02 04:30:11
Head of the Institute of Economic Analysis, Mohammad Talibli
Business entities in Azerbaijan are mainly classified into 4 groups: micro, small, medium and large. The number of these business entities exceeds 1 million. And what business entity they are considered to be is determined by the rules of NK. These rules are determined by 2 criteria: the number of employees and the level of annual income.
This year, new rules of the game have been defined for MICRO ENTREPRENEURS, who are among those entrepreneurial subjects.
I want to describe it briefly.
Who are considered micro-entrepreneurs? Employees with an annual turnover of 200,000 manat and less than 10 employees are considered micro-entrepreneurs. They paid a tax of 5% of their income.
After the last changes (01.01.2024), the number of employees was reduced from 10 to 3. If they have 3-10 employees, they will pay 20% of their income tax. No, if there are less than 3 people, then they will pay 5% tax.
For those (10 employees) micro-entrepreneurs, 75% concessions disappear. For information, let us inform you that there are 335 thousand micro-entrepreneurs in our country. The final decision will affect the interests of these business entities.
There are 2 interested parties (stakeholders) related to this decision: the government (fiscal structure-IN) and micro-entrepreneurs. With this decision, the government wants to provide more funds to the state budget by collecting 4 times more funds from micro-entrepreneurs among more than 740,000 active taxpayers in the country.
And micro-entrepreneurs can choose one of the 2 predictable ways to avoid this trap:
(i) trying to increase the number of micro-entrepreneurial subjects due to the fact that the number of employees is small;
(ii) preferring to operate in neighboring countries with a more favorable tax regime for micro-entrepreneurs. For example, micro-entrepreneurs with a market turnover of 270,000 manat in Georgia pay 20 times less tax than in our country, i.e. only 1%. Micro-entrepreneurs with a special field of activity will become taxpayers of that country, and the tax system of Azerbaijan will be the loser.
Therefore, when making a decision about any area of the economy, they should take into account the “Cobra effect” known to experts. Otherwise, under the influence of that decision, we can witness the increase, not the decrease of the snake.