KYRGYZSTAN TODAY Policy briefs on - Department of Geography
KYRGYZSTAN TODAY Policy briefs on - Department of Geography
KYRGYZSTAN TODAY Policy briefs on - Department of Geography
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As for governmental audit and inspecti<strong>on</strong> activities, estimates provided by the<br />
Investment Council Secretariat are instructive: for ten government inspecti<strong>on</strong> bodies’,<br />
the efficiency ratio to gross nati<strong>on</strong>al product is negative, equaling minus 0.1 per cent.<br />
Taking into c<strong>on</strong>siderati<strong>on</strong> that efficiency, the GNP ratio <strong>of</strong> this government (tax bodies)<br />
audit, inspecti<strong>on</strong> <strong>of</strong> private sector for the years 2004-2005 was minus 0.6 per cent, total<br />
GNP losses as a result <strong>of</strong> audits/inspecti<strong>on</strong> are minus 0.7 percent. Government inspecti<strong>on</strong><br />
bodies (excluding tax bodies and social fund) held 23,918 inspecti<strong>on</strong>s during year 2006.<br />
Total budget expenses, both direct and indirect, are 78.1 milli<strong>on</strong> KGS, and 88.2 thousand<br />
man-days were spent <strong>on</strong> inspecti<strong>on</strong>s, compared to budget revenues <strong>of</strong> 2.8 milli<strong>on</strong> KGS.<br />
Inspecti<strong>on</strong> efficiency was minus 75.3 milli<strong>on</strong> KGS, or minus 0.067 percent to GNP.<br />
There are also examples <strong>of</strong> low efficiency am<strong>on</strong>g inspecti<strong>on</strong>s by Law Enforcement<br />
bodies. Thus, according to the data from the General Prosecutor Office, such law<br />
enforcement bodies as the Ministry <strong>of</strong> Internal Affairs, Nati<strong>on</strong>al Security, Finance<br />
Police, State Customs Committee and Drug C<strong>on</strong>trol Agency completed investigati<strong>on</strong><br />
<strong>of</strong> 987 ec<strong>on</strong>omic crime and corrupti<strong>on</strong> cases. The cumulative damage amount was 448.2<br />
milli<strong>on</strong> KGS (or $12.1 milli<strong>on</strong>); 293.4 milli<strong>on</strong> KGS or $7.9 milli<strong>on</strong> <strong>of</strong> this was repaired.<br />
Can <strong>on</strong>e call the activities <strong>of</strong> law enforcement ministries and agencies efficient?<br />
The Investment Council Secretariat also made a negative note after a recent license<br />
system assessment: “During current years the scope <strong>of</strong> paid services <strong>of</strong> government<br />
bodies is c<strong>on</strong>stantly growing. Government bodies are actually doing business when<br />
providing such services. In additi<strong>on</strong>, government bodies establish norms and standards<br />
and it is also they who m<strong>on</strong>itor these norms. Permit documents registry issued by the<br />
government bodies include a list <strong>of</strong> 136 permits. The actual number <strong>of</strong> different permits,<br />
sublicenses and other documents is much bigger, and most <strong>of</strong> them do not comply with<br />
the current legislati<strong>on</strong>” [3].<br />
Corrupti<strong>on</strong> in tax and fiscal interrelati<strong>on</strong>s<br />
The sec<strong>on</strong>d largest area <strong>of</strong> corrupti<strong>on</strong> is the tax system. Gaps in the current tax system<br />
open the way for different corrupti<strong>on</strong> deals with no punishment. This happens because<br />
government <strong>of</strong>ficials who are resp<strong>on</strong>sible for budget levies collecti<strong>on</strong> and payment<br />
allocati<strong>on</strong> (and who are c<strong>on</strong>sidered by the public the most corrupt <strong>of</strong>ficials, al<strong>on</strong>g with<br />
customs <strong>of</strong>ficers) abuse their authorities quite legally for pers<strong>on</strong>al gain. Tax administrative<br />
bodies developed a Tax Code for themselves, inspect themselves and punish themselves.<br />
Newly-introduced taxes menti<strong>on</strong>ed in the current editi<strong>on</strong> <strong>of</strong> the Tax Code argue for<br />
an increase <strong>of</strong> tax burden <strong>on</strong> both entrepreneurs and the nati<strong>on</strong>’s general populati<strong>on</strong>. For<br />
example, a newly-established tax such as a real estate tax, scheduled for implementati<strong>on</strong><br />
in the beginning <strong>of</strong> 2009, is a potential risk <strong>of</strong> growth in corrupti<strong>on</strong>. This c<strong>on</strong>clusi<strong>on</strong><br />
reflects the fact that there was no identificati<strong>on</strong> <strong>of</strong> the government body that would<br />
be in charge <strong>of</strong> assessing and evaluating the real estate to be taxed. If such assessment<br />
is the resp<strong>on</strong>sibility <strong>of</strong> the tax service, this will become another tool <strong>of</strong> corrupti<strong>on</strong>. We<br />
can compare this with the restricti<strong>on</strong>s <strong>of</strong> traffic rules that allows fines to be charged for<br />
traffic rules, when infringement became high. High traffic fines did not result in quick<br />
road accident rate reducti<strong>on</strong>, but merely made it possible for road police <strong>of</strong>ficers to<br />
increase the size <strong>of</strong> un<strong>of</strong>ficial levies. The same thing will happen with tax real estate tax<br />
introducti<strong>on</strong>: it will not increase budget revenues but will enrich some tax <strong>of</strong>ficials.<br />
During a meeting held <strong>on</strong> June 24 th , 2008 between the Internati<strong>on</strong>al Business Council<br />
and the Uni<strong>on</strong> <strong>of</strong> Entrepreneurs <strong>of</strong> Kyrgyzstan and USAID, new Draft Tax Code issues<br />
were discussed. According to participants <strong>of</strong> this meeting, tax bodies are given excessive<br />
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