PwC Azerbaijan believes tax differentiation unreasonable

Baku. 1 December. REPORT.AZ/ “I think that measures towards differentiation of value-added tax (VAT) won’t give expected effect”. ‘PwC Azerbaijan’ Director on Tax Issues Arif Guliyev told Report.

According to him, the project may yield positive results, if applied in customs system: “Current project envisages VAT discount only for end-products. For example, 8-10% differentiation to finished medical drugs, while applying 18% VAT to its imported ingredients or electric power used for its production, as well as other components of production chain, will give little effect. Additional percentages paid for import of ingredients or electric power will be added on value of final product, which will result in only 1-2%, not 8-10% reduction of the cost. That’s why low VAT must be applied to import of ingredients and other components of production chain.

Notably, Ministry of Taxes sent draft law to Milli Majlis (Azerbaijani Parliament) on differentiation of VAT for some social services and products. Differentiation will be applied primarily on drugs, school equipment and other products and services of social importance. The law will be launched on January 1 of next year, if adopted before year-end.