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Kazakhstan tax reform to raise medical costs 16%, business warns

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Kazakhstan tax reform to raise medical costs 16%, business warns

Kazakhstan's tax reform will raise medical service costs by 16% and increase drug prices, business leaders warned at the Astana Tax Forum on August 21. The National Chamber of Entrepreneurs Atameken called for a unified 3-5% VAT rate for healthcare to prevent the increase. The government has supported a unified approach but has not yet formalized the decision.

Key Facts

  • Kazakhstan's budget deficit was reduced to 4.9% of GDP from 6.9-7% after the tax reform, according to financier Galim Khusainov.
  • The National Chamber of Entrepreneurs Atameken proposed a unified 3-5% VAT rate for healthcare without a later increase to 10%.
  • The government has supported the need for a unified approach but has not yet formalized the decision.
  • Kazakhstan's tax burden was 14% of GDP, compared to 18% in OECD countries.

Budget Deficit and Tax Reform

Kazakhstan's chronic budget deficit, held at 6.9-7% of GDP against a safe limit of 5%, drove the tax reform, according to financier Galim Khusainov. The state withdrew over 5 trillion tenge annually from the National Fund to finance pensions, benefits, and infrastructure. The deficit has been reduced to 4.9% and National Fund withdrawals nearly halved to 2.7 trillion tenge. Khusainov called the VAT increase painful but necessary, noting OECD base VAT rates around 20% and Russia's 22%.

Healthcare Sector Risks

Atameken Deputy Chairman Timur Zharkenov warned of critical risks for the pharmaceutical industry and medicine from new Tax Code norms. The current code offers multiple VAT options for pharma: standard 16%, preferential 5% rising to 10%, and exemption. Distributors often cannot know if imported drugs are for state orders, so they apply the maximum 16% rate to entire batches. Atameken proposed a unified 3-5% VAT rate for healthcare without a later increase to 10%. The government has supported a unified approach but has not yet formalized the decision.

Medical Service Costs

VAT on medical services, without tax deductions, effectively means a direct 16% increase in service costs. Business fears the overall tax burden increase will ultimately reflect in prices of goods and services.

1 source

Kazakhstan tax reform to raise medical costs 16%, business warns

inbusiness.kz

Inbusiness.kz