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Kazakhstan
>> Regional Overview >> Kazakhstan Overview Activity Data Sheet
PROGRAM: Kazakhstan
TITLE & NUMBER: Increased Soundness of Tax and Budget Policies and Administration, 115-012
STATUS: New
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $2,400,000 FSA
PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: $2,300,000 FSA
INITIAL OBLIGATION: FY 2001 ESTIMATED COMPLETION DATE: FY 2005Summary: The goal of this objective is to increase the soundness of tax and budget policies and administration. These reforms are key elements in Kazakhstan's transition to a market-driven economy. USAID's fiscal reform activity will help to: 1) develop an effective tax system that should raise the revenue needed by the public sector, placing a minimal burden on the taxpayer; 2) implement program budgeting and proper budget execution to ensure effective delivery of services at the lowest cost; and 3) improve the allocation of resources at the local level to better support local development issues.
Program Categories include support for fiscal reform.
Key Results: The principal results sought under this objective are: 1) the adoption and implementation of an improved tax code; 2) improved budget development and execution; and 3) improved intergovernmental finance.
Performance and Prospects: The Government of Kazakhstan's (GOK) continued commitment to fiscal reform has led to substantial progress. Fiscal management has improved, inflation is lower, tax revenues are significantly higher and the government was able to carry out its spending plans. Further, the GOK continues to adopt reforms that are necessary to improve its ability to raise revenues and manage its limited resources.
By the end of 2000, tax collections jumped to 17% of GDP, 2.5% above the USAID target of 14.5%. Meanwhile, arrears were significantly reduced, to a mere 0.8%, and inflation dropped to just 9.8% per annum. In similar fashion, fiscal deficit as a share of GDP in 2000 was 0.7% of GDP compared to a target of 3.5%. This represents a drastic improvement over 1999, when the deficit was 3.6%.
In December 2000, the draft tax code passed the first reading in parliament. A new code is expected to be passed in 2001, and USAID will continue to help improve it to ensure that it is simpler and more equitable.
Significant progress was also made in tax administration. Reorganization of the administrative structure is one example. The headquarters at the Ministry of State Revenue was tremendously under-staffed. Consistent with USAID advice, headquarters staff has increased by 50%. In addition, inspectors have been trained in audit, collection and tax treaty benefits. This increased compliance significantly, resulting in a revenue increase of 40% during 2000. Also, the tax treaty backlog has decreased, and computerization of the tax inspectorate is on schedule.
At the local level, USAID completed a credit analysis of the city of Almaty. That analysis is being used by the European Bank for Reconstruction and Development to evaluate the city for a loan to improve waste management. USAID has also improved Atyrau's capacity for budgetary and capital planning and helped it to develop a five-year capital budget. Budget analysts have been trained in accounting, finance and budget development.
In addition to these achievements, USAID supported the GOK's efforts to develop an oil fund by sending thirty parliamentarians on a study tour. This study tour gave members of parliament the opportunity to discuss issues and voice key concerns with counterparts from other oil producing countries. The study tour played a major role in helping the GOK reach consensus regarding the establishment of an oil fund. The new oil fund, which was established in December 2000, is designed to shelter Kazakhstan's economy from the destabilizing effects of sharp fluctuations in international oil prices.
Solid results were also achieved in intergovernmental finance this year. The government committed itself to changing its current non-transparent system of allocating revenues to the regions in favor of the stable rule-based system recommended by USAID advisors. In addition, the Government clarified the expenditure responsibilities of local governments.
In FY 2001, USAID intends to obligate $2,400,000 to the category of fiscal reform for technical assistance, capacity building and special study activities to further strengthen gains made in fiscal reform.
In FY 2002, USAID will continue to help the Ministry of Revenues streamline tax administration to increase efficiency, reduce corruption and improve fairness and consistency of the tax system. Experts will work with the Ministry of Finance to improve its budget development and expenditure systems. Better revenue and expenditure systems enable the Government to improve the allocation and management of revenues especially for health and education. USAID will assist local governments to adopt transparent program budgeting to reduce waste and abuse and deliver better services at the local level. During 2002, USAID will also perform an evaluation of the fiscal environment in Kazakhstan.
Beneficiaries: The direct beneficiaries of USAID's assistance are the national and local government agencies in need of tax revenues and sound budget policies, as well as those parties to whom the government owes money (i.e., arrears). Indirectly, improved fiscal policies should improve economic growth and development leading to greater economic and social stability for the people of Kazakhstan.
Possible Adjustments to Plans: None anticipated.
Other Donor Programs: The World Bank supported the computerization effort of the State Tax Committee and is continuing with a major Treasury modernization project that involves technical advisors, training and equipment. European Union-Technical Assistance for the Commonwealth of Independent States plans to provide the Ministry of State Revenues with assistance in tax administration. The European Bank for Reconstruction and Development is in the process of organizing a major loan to the city of Almaty.
Principal Contractors, Grantees, or Agencies: Barents Group implements the fiscal reform activity. The Academy for Educational Development (AED) coordinates participant training.
FY 2002 Performance Table
Selected Performance Measures: Increased Soundness of Tax and Budget Policies and Administration, 115-012
Indicator FY97 (Actual) FY98 (Actual) FY99 (Actual) FY00 (Actual) FY01 (Plan) FY02 (Plan) Indicator 1: Tax Revenues as a Percent of GDP 12.5% 12.2% 13.8% 17% 14.8%* 15.3%* Indicator 2: Improved Tax Code and Implementation of the Code N/A N/A N/A 36.3% 40% 50% Indicator 3: Improved Budget Development and Execution N/A N/A N/A 44.4% 50% 60% Indicator 4: Improved Intergovernmental Finance N/A N/A N/A 30.3% 35% 40% Indicator Information:
Indicator Level (S)or(IR) Unit of Measure Source Indicator Description Indicator 1: SO Percent The IMF's July 2000 Assessment of the Fiscal Environment. Quarterly or yearly assessments provided by other donors and KPMG/Barents. Tax revenues as a percent of GDP. Indicator 2: IR Percent The IMF's July 2000 Assessment of the Fiscal Environment. Quarterly or yearly assessments provided by other donors and KPMG/Barents. Total number of tax code benchmarks achieved as a percent of total number of tax code benchmarks. Indicator 3: IR Percent The IMF's July 2000 Assessment of the Fiscal Environment. Quarterly or yearly assessments provided by other donors and KPMG/Barents. Total number of budget development and execution benchmarks achieved as a percent of total number of budget development and execution benchmarks. Indicator 4: IR Percent The IMF's July 2000 Assessment of the Fiscal Environment. Quarterly or yearly assessments provided by other donors and KPMG/Barents. Total number of intergovernmental finance benchmarks achieved as a percent of total number of intergovernmental finance benchmarks. *This exceptionally high actual score was due to a temporary spike in FY2000 petroleum sector contributions.
U.S. Financing
(In thousands of dollars)
Increased Soundness of Tax and Budget Policies and Administration, 115-012
Obligations Expenditures Unliquidated Through September 30, 1999 0 DA 0 DA 0 DA 0 CSD 0 CSD 0 CSD 1,000 ESF 1,000 ESF 0 ESF 0 SEED 0 SEED 0 SEED 15,494 FSA 13,245 FSA 2,249 FSA 0 DFA 0 DFA 0 DFA Fiscal Year 2000 0 DA 0 DA 0 CSD 0 CSD 0 ESF 0 ESF 0 SEED 0 SEED 3,238 FSA 3,629 FSA 0 DFA 0 DFA Through September 30, 2000 0 DA 0 DA 0 DA 0 CSD 0 CSD 0 CSD 1,000 ESF 1,000 ESF 0 ESF 0 SEED 0 SEED 0 SEED 18,732 FSA 16,874 FSA 1,858 FSA 0 DFA 0 DFA 0 DFA Prior Year Unobligated Funds 0 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Planned Fiscal Year 2001 NOA 0 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Total Planned Fiscal Year 2001 0 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Future Obligations Est. Total Cost Proposed Fiscal Year 2002 NOA 0 DA 0 DA 0 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 1,000 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 18,732 FSA 0 DFA 0 DFA 0 DFA
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Last Updated on: May 29, 2002 |
