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The Deputy of Mazhilis Proposed to Renew Payment by the Subsurface Users of Excess Profits Tax in the Republic.

  february 2011

Recently, Askhat Bekenov, the Republic of Kazakhstan Mazhilis Deputy has requested the Prime-Minister to renew a legislative norm concerning of excess profit tax to be paid by the subsurface user.

The proposal pointed out that the subsurface use contract was accompanied by definitive super-profit tax calculated based on feasibility study of field profitableness. As a result, the subsurface users owning medium and small deposits were taxed under lower rate. According to Deputy, the state benefited substantially from those low profit fields, which would be of no interest to investors, otherwise.

In other words, - the deputy of Mazhilis has noted, - an analogous taxation scheme was progressive as it made provision for field specific features.

Additionally, A.Bekenov stressed that the state, which transferred the majority of deposits to commercial companies in the end of XX century expected basic excess profit taxation inflow 6-8 years later. However, it did not take place. Kazakhstan failed to receive the planned amounts.

In 2009, unfortunately, tax stability regime was abolished. Subsurface users were to pay taxes and excess profits tax according to current legislation using the amended surplus profit tax basis, deposit return calculation mechanisms. The new structure stipulates that tax calculation should be done according to profitability, while it was based on investment return and cost-effectiveness prior, - the Deputy remarked.

Also, he pointed out, that tax code amendments were supported by large subsurface users, since they were extremely favourable. I think that one of main reasons for the RK Tax Code RK amending was the highly profitable subsurface users unwillingness to continue large enough by that time super-profit tax payments, - he stated.

According to A.Bekenov if this state of affairs was not to be changed urgently, than the state losses would be of several state annual budgets sizes, while Kazakhstan lost hundred billions of Tenge by the present moment.

I insist on the Tax Code relevant provisions changing and restoration of the abolished mechanism of excess profits tax, which was valid until 2004, - declared Askhat Bekenov.
News source:  Kazakhstan Today News Agency
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