Azerbaijan’s privatization program could be boosted by the opening of the Baku Stock Exchange (BSE) which was to have begun operations in late July. Initially only treasury bills, privatization vouchers and depositary receipts for Russian shares were to be traded. Trading in shares of large, privatized companies is expected to eventually take place, but further delays in the BSE’s activities are to be expected as well. The placement of shares in the International Bank of Azerbaijan and the Baku electricity network, which were expected to be the first stocks likely to be traded on the BSE, are caught up in delays (RFE/RL July 24; Reuters, July 5).
As in Russia, tax reform brings some of Azerbaijan’s best market reform news. The parliament passed the third and final reading for legislation on a new tax code, which is seen as a major cornerstone of Azerbaijan’s reform program. The code, which comes into effect on January 1, 2001, unifies various laws on taxation and more closely specifies the activities of tax inspectors. The new tax code consists of nine taxes which are to replace all existing levies. These include a corporate profits tax on legal entities (down to 27 percent from 30 percent), an income tax (cut to 25 percent from 27 percent), a land tax (down to 27 percent from 30 percent), a property tax for legal entities (down to 1 percent of property value from 3 percent), an excise tax (rates dependent on the good), VAT (down to 15 percent from 20 percent), oil and gas royalties, a road tax (0.5 percent) and a social tax.
By simplifying the tax system, lowering tax rates and reducing possibilities for excessive discretion by tax collectors, the new tax system is intended to reduce tax evasion, as well as support small business and stimulate enterprise growth. It is also aimed at attracting foreign investment into the non-oil sectors of the economy. All enterprises with annual turnover of less than 10 million manat will only pay a unified tax of 5 percent on that turnover.
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