The Tajik government has once again written off the tax debts of two state-run enterprises: the Communication Service’s JSC "Tajiktelecom" and the State Unitary Enterprise (SUE) "Center for Electromagnetic Compatibility and Radiomonitoring." A government decree ordered the recognition and write-off of tax arrears deemed uncollectible, amounting to a total of 135 million somonis (US$12.7 million). These arrears include unpaid taxes, fines, and interest accrued up until January 1, 2024.
"Tajiktelecom" was forgiven debts totaling almost 97.5 million somonis, which includes 56.8 million somonis in unpaid taxes and 40.7 million somonis in fines and interest. As the national telecommunications operator, "Tajiktelecom" holds a monopoly over internet traffic supply and its sale to private operators, which international experts argue hinders the development of the telecommunications market in Tajikistan.
The SUE "Center for Electromagnetic Compatibility and Radiomonitoring" had 37.5 million somonis of debt written off, including 22.4 million somonis in taxes and 15 million somonis in fines and interest. This is not the first time these companies have received tax relief. Early last year, the Center's 33 million somonis in tax debts was postponed for one year. Similarly, "Tajiktelecom" had its tax debts of over 67.2 million somoni deferred for a year just a month prior.
Is this legal?
According to the rules for recognizing tax debts as uncollectible, debts can be forgiven in cases like the liquidation of a legal entity due to insufficient assets, bankruptcy, the death of an individual, or natural disasters. However, none of the aforementioned state-run enterprises fall under these categories. Nonetheless, there is a clause granting the government broad authority to write off debts to any taxpayer: “Regardless of the provisions of the Tax Code, the Government of Tajikistan may declare a taxpayer’s debt as uncollectible.”
The government justifies such relief as part of efforts to improve the financial health of state-run enterprises. In 2019, the government instructed relevant ministries to reduce the debts of major state enterprises, and a coordinating council was established to manage fiscal risks posed by these enterprises. According to the World Bank, there are over 1,000 state-owned enterprises (SOEs) in Tajikistan, of which 600 are majority-owned by the government. Many of these SOEs are unprofitable, posing significant fiscal risks to the country's financial stability. The total debt of 27 major SOEs monitored by the Ministry of Finance stood at 60.8 billion somonis ($5.5 billion) as of early 2024, equal to 46.5% of the previous year’s GDP.
Forgiving some, fining others
Independent experts criticize this practice, describing it as unfair. They argue that while some receive large-scale debt forgiveness, others are fined for even minor delays. Some experts have long called for the restructuring and subsequent privatization of problematic state enterprises, which could reduce the burden on the budget, diminish monopolization, and foster competition.
However, economist Bahriddin Karimov notes that while reforms are often simulated to satisfy international donors, the real issue lies in the monopolistic rent these enterprises generate for the controlling structures.
International financial institutions, including the IMF and the World Bank, have repeatedly urged the Tajik government to abandon the practice of providing tax relief to select entities, arguing that it distorts market processes and hinders fair competition. According to the IMF, halting these tax breaks would allow for increased budgetary spending on critical sectors like healthcare, education, and social protection.
In 2022, the total amount of tax and customs exemptions granted to commercial entities in Tajikistan amounted to 12.7 billion somonis, or 10.9% of GDP. Tax exemptions on internal taxes in 2023 amounted to 6.1 billion somonis ($550 million), which is 34.3% of the previous year’s total budget revenues. With the additional tax debts forgiven, the budget's revenue losses will only increase further.
