The country’s law on the national budget for 2023 provides for tax and customs incentives to separate enterprises and organizations.
A company constructing a five-star Ismoili Somoni Hotel in Dushanbe is among beneficiaries of tax incentives again.
The country’s law on the 2023 national budget provides for slashing the value added tax (VAT) and legal entity income tax for customer and general contractor of this long-term construction by 50 percent.
The law also provides for cutting VAT on imports for this facility by 50 percent and exempt imports for this facility from paying customs duties.
Recall, the construction of Ismoili Somoni Hotel officially commenced in Dushanbe on March 15, 2006. It had previously been noted Ismoili Somoni Hotel is being built on orders from the President’s Executive Office by a company called Ismoili Somoni-21st Century.
Meanwhile, it is now noted that China’s Beijing Foch Mechanical Equipment Installation Engineering Co., Ltd is general contractor and Joint-Stock Company (JSC) Dollmark Ltd, which is registered in the British Virgin Islands (BVI), is the customer of the hotel.
The hotel was expected to be completed before the end of 2018 and to be put in commission in 2019. However, Ismoili Somoni Hotel is being constructed for already sixteen years and the company constructing the hotel has enjoyed tax incentives all these years being exempt from paying VAT and custom duties.
Customers and general contractors of the construction of the National Theater of Tajikistan and multifunctional administrative building that is being built on the Ismoili Somoni Avenue in Dushanbe’s Sino district have been granted similar customs and tax incentives.
Besides, VAT for processors and sellers of wheat and macaroni products will be cut from 15 percent to 10 percent.
Import of equipment and special vehicles and spare parts for them purchased from the budget is exempt from customs duty and VAT on import of them is cut by 50 percent.
VAT for suppliers of natural gas and electricity is slashed by 50 percent.
VAT for the Dushanbe State Unitary Enterprise (SUE) for the Production, Purchase, Reservation and Sale of Essential Goods is also cut by 50 percent when selling food products.
VAT and excise tax for suppliers of low-sulphur fuel oil for the Dushanbe Open Joint-Stock Company (OJSC) Teploelktrotsentral (thermal power plant) are slashed by 50 percent.
They will not charge interest on tax arrears of open joint-stock companies Sangtudinskaya GES-1 and Roghun NBO arisen from the supply of electricity to Barqi Tojik (Tajikistan’s national electricity utility company).
Tax incentives are also granted to the Tajikistan Football Federation (TFF) and football cubs. Real estate tax for them is slashed by 50 percent, and foreign coaches and football players, involved in the development of activities of the Federation and football clubs, are exempt from paying physical entity income tax.
The Ministry of Foreign Affairs is exempt from paying customs duties and payments, while VAT on import of blank biometric passports is cut by 50 percent.
Imports of elite seed varieties, cocoons, flowers, decorative and fruit trees as well as thoroughbred and beef cattle are exempt from customs duties and payments.
VAT on all kinds of livestock feed is slashed by 50 percent.
Performance of work and provision of services by the branch of the Tractebel Engineering S.A. Consortium at the site for construction of the Roghun hydroelectric power plant are exempt from income tax, and VAT on them is slashed by 50 percent.
Imports of food products, fertilizers, gasoline and diesel fuel by the Agency for State Material Reserves under the Government of Tajikistan are exempt from customs duty, and VAT on them is cut by 50 percent.
Meanwhile, a report, released by the Executive Board of the International Monetary Fund (IMF) on February 18, 2022, in particular, stressed the need for fiscal discipline to ensure that debt remains on a sustainable downward trajectory given the high risk of debt distress. The IMF recommended introducing an operational fiscal anchor, complemented with steps to phase out tax exemptions, broaden the tax base, and improve public spending efficiency and transparency.
Tajik experts have repeatedly spoken out against the widespread practice of granting tax incentives in the country. According to them, the practice of providing tax exemptions makes the country’s fiscal system any less fair, because due to tax benefits, some pay less than others with the same income.
According to some data, the country's budget loses almost a third of tax revenues due to the practice of providing tax benefits.
