TAX RETURNS

Who would not like to get back some of the money spent on goods purchased. Without cutting the price of goods moreover, which is largely applicable to the East and to receive some of money spent on the purchase.

This is precisely what a Duty Free system offers, it literally means "free of duty". When they are abroad, many people have noticed the "Duty Free" stickers on shop windows, and some of us take advantage of that. Those who have done it know that the Duty Free system is a system that allows you to get back part of the money spent on shopping in another country. To be more precise, the system refunds foreign citizens the VAT they have paid on their purchases.

Duty Free Shopping has proved how effective it can be. It was invented in Sweden in the 1960s to stimulate retail sales of consumer goods. On a legislative level, foreign tourists were made equal to exporter companies exporting goods abroad and they were also granted discounts on this type of exports. As a result, the volume of sales rose considerably on account of the growth in the numbers of foreign tourists.

Out of approximately 130 VAT-collecting countries, roughly 50 return the duty paid to those not resident in the country. Azerbaijan has recently become one of these countries. 

Azerbaijan's Ministry of Taxes is having a Duty Free trial run, while it is awaiting the legislative basis needed for this. At the present time, approximately 100 shops and Baku's international Heydar Aliyev airport have already gone over to Duty Free trading. The Tax Ministry has attempted to make all the advantages of the system available during the European "Formula-1" Grand Prix motor racing in Baku, since the competition has attracted numerous tourists. It should be noted that during the preparations for these competitions and the holding of them Baku airport served approximately 120,000 passengers and the number of passengers that arrived exceeded 40,000.

The law-makers have not made the tax people wait long. On 24 June parliament adopted the changes to the Tax Code relating to the Duty Free system. According to these amendments, tourists will be able to resort to Duty Free shopping, if they spend at least 300 manats at any single shop and take the goods out of the territory of Azerbaijan within 90 days of the day of purchase.

Limitations regarding minimum cost and the expiry date of the Duty Free bill operate in most countries where this system is used. According to the amendments, a commission charge of 20 per cent is retained from the VAT sum returned. This means that if a foreign tourist buys goods in Azerbaijan to the value of 1,000 manats, he or she will be refunded 144 manats, an estimate based on an 18-per-cent VAT rate and the sums of commission taken.

The Tax Code also contains a list of goods not covered by Duty Free: these are goods subjected to customs duty, foodstuffs, medicinal preparations, medical equipment and so forth. The Duty Free system does not extend to goods sent by post either.

More and more tourists are coming to Azerbaijan. The holding of major sports and cultural events has made Azerbaijan an increasingly popular destination for tourists, especially from the surrounding countries. On the other hand, the deterioration of relations between Russia and Turkey and the terrorist attack on the Russian passenger airliner in Egypt have forced millions of tourists to seek out alternative destinations. The measures undertaken to develop the tourist sector, in particular the construction of major tourist centres and hotels, the easier procedures for obtaining visas, including the start of issuing online visas, has made Azerbaijan an attractive country to tourists. Besides this there is the devaluation of the manat, which means that for foreign citizens holidays in Azerbaijan have become considerably cheaper.

Azerbaijan is increasingly mentioned in the ratings of countries that are cheap to live in and travel in. And what kind of tourist does not look forward to shopping during their holiday?!

The introduction of a Duty Free system is an important step in developing this trend. It stimulates the growth of trade, the opening of new shops and the expansion of those already operating, the creation of additional jobs and an increase in the volume of tax revenues obtained from the commercial sector.

The chairman of the parliamentary committee for economic policy, industry and entrepreneurship, Ziyad Samadzada is of a similar opinion. Speaking in parliament, he stated: "The sums of VAT returned in keeping with the Duty Free system will be compensated by the taxes on profits against the backdrop of a growth in trade and economic activity in the country."

Azerbaijan's Ministry of Taxes has stated that it will set about fully applying the Duty Free system in the very near future. At the present time, the ministry is conducting the work of joining new shops and other airports in the country (Lankaran. Naxcivan, Ganca and Qabala) to the system.

Incidentally, in Azerbaijan the system is to be operated by the Tax Ministry, whereas in world practice the services returning VAT are offered by private firms. The company Global Blue, which is operating in 40 countries, is the leader in this market. It is not to be ruled out that in the future private business will be granted the right to operate the Duty Free system in Azerbaijan as well.

The operation of this system can also be improved in Azerbaijan by installing special Duty Free terminals at airports which will save considerable time in obtaining refunds. At the present time, the online tax bill needs to be checked by the customs, then it needs to be presented to an authorised bank and the refund can be received immediately in cash or paid into an account within 10 days.

On the whole, it may be said that the application of Duty Free shopping definitely makes a positive contribution to the development of tourism and trade in Azerbaijan. These two sectors are known to be priority ones for the government in post-petroleum economy conditions. Consequently, the decision to introduce Duty Free shopping may be regarded as an important component in the reform aimed at diversification of Azerbaijan's economy.