Today (August 30, 2013) the Economic Research Center (ERC) held a seminar on "Substantiation of the expediency of the application of the tax-patent system" within the "Micro-Entrepreneurship Support Project" implemented with the financial support of the USAID.

The round table was attended by representatives of the Ministry of Taxes, the National Confederation of Entrepreneurs, the International Finance Corporation, academia and independent think tanks, experts and the media. Welcoming the participants of the round table, Sabit Bagirov, chairman of the EDF, spoke about the necessity and advantages of the introduction of the tax patent system (VPS) in Azerbaijan. He noted that this tax system was applied in Azerbaijan in the early 1990s. The current situation has created the necessary conditions for the resumption of discussions in this direction. Thus, the introduction of the patent tax system creates additional opportunities to reduce the costs of small entrepreneurs, to eliminate barriers they face. Entrepreneurs applying this tax will not receive a cash register and will not submit quarterly tax returns.

Gubad Ibadoglu, a project expert and member of the ERC Board, made a presentation on "What does the application of the tax-patent system promise?" He focused primarily on the most common forms of tax evasion. These forms include changing the parameters of the tax object, creating conditions for full or partial exemption of the taxpayer from liabilities, especially VAT on imports, concealment of turnover and reduction of payments, preparation of false primary accounting documents, double-entry bookkeeping, exaggeration of special technological needs and expenses. The speaker spoke about various methods of its detection (trend analysis, structural analysis, comparative analysis, correlation, mirror methodology and supply-demand balance). He noted that the proposed VPS can contribute to overcoming many of these problems. Speaking about the advantages of PVS for both entrepreneurs, the state and consumers, Ibadoglu said that the subjects of this type of tax will be small entrepreneurs. At the same time, a simplified tax system will operate. Small entrepreneurs who choose this tax voluntarily will be able to operate without contacting the tax authorities by paying the patent amount. (Presentation: "What does the application of the tax-patent system promise")

After the presentation, participants addressed questions to the speaker. President of the Anti-Corruption Foundation Vasif Movsumov was interested in how the government would react to these proposals, and Faig Samadov, a representative of the National Confederation of Entrepreneurs, was interested in how to calculate the taxable turnover in PVS. Khazar University Professor Fuad Rasulov made a note. He said that monitoring the dynamics of the share of simplified tax revenues in total tax revenues, rather than in budget revenues, would give the right results.

Speaking at the discussion, entrepreneurs Ilham Asgarov said that it would be expedient to apply this tax system in small businesses that are difficult to tax. He noted that VAT payers are not able to reimburse the amount of VAT when dealing with simplified taxpayers.

Chairman of the Center for Support of Economic Initiatives Azer Mehdiyev noted that the biggest problem in Azerbaijan today is not tax evasion, but tax evasion. Therefore, this type of tax can play an important role in the registration and taxation of these tax objects. He also considered it expedient to apply this type of tax, as well as the traditional simplified tax.

Ilkin Garayev, chairman of the Center for Support of Small and Medium Enterprises, proposed to increase the turnover for the simplified tax. He also said that the tax authorities' advance payment from last year's turnover for the volume of transactions last year was an interference in the activities of entrepreneurs.

Representative of the International Finance Corporation Hasan Huseynov spoke about the work done by his organization in the field of tax reform, noting that they also made similar proposals.

Independent expert Ogtay Hagverdiyev commented on the issues submitted for discussion. He suggested that the proposed tax be applied only to individual entrepreneurs, as well as a single tax rate, no difference between the regions and the capital, and a tax rate of 2 percent.

In his speech, the representative of the Ministry of Taxes Vusal Shikhaliyev spoke about the work done by his government agency in this area. He noted that it is more appropriate to deduct taxes from income, because it is fairer and allows for transparency. In his speech, the representative of the Ministry of Taxes also considered it expedient to apply the proposed new tax system for difficult-to-control activities. He noted that Azerbaijan is the third country in the world in terms of simplified tax turnover, and opposed its reduction.

In conclusion, Sabit Bagirov thanked the participants for their valuable comments and said that discussions would continue in this direction.