CASH OR BANK CARD?

Azerbaijan is preparing to introduce major changes in the tax laws to expand the use of non-cash payments in shops and in the service sector. A relevant bill, developed by the country's fiscal agency, is already under consideration in the government and is being coordinated with relevant ministries and agencies.

The draft law "On the stimulation of non-cash payments and limitation of cash payments", along with the stimulating measures, provides for administrative and financial sanctions and restrictive measures on the use of cash payments.

Card in exchange for taxes

It must be noted that instructions on the preparation of this document were given in the decree of President Ilham Aliyev in connection with the application of the law on amendments to the Tax Code in 2013. The head of the Legal Department of the Ministry of Taxes of Azerbaijan, Samira Musayeva, said that the bill was prepared after the study of the most successful models, namely the experience of the US, European countries, Singapore and Japan. In connection with its preparation, the draft amendments to the Tax Code in 2014 do not provide for changes in tax rates.

In order to promote non-cash payments, it is planned to introduce tax benefits for a period of 3-5 years in the form of lower tax rates (including on VAT) or exemption from taxes. At the same time, areas of activity exempt from VAT will be specified. "In some cases, exemption from VAT will be accompanied by a tax on the total turnover," the head of the ministry department said.

According to her, these preferences will apply to the cashless transactions of payers of the profit tax, VAT, simplified and other types of taxes, and they will be differentiated depending on the scope of activities, turnover, etc. But one thing unites them - benefits are available for all shops and service facilities only in respect of their cashless turnover.

Incentives are also provided for customers, namely, if they pay for goods or services without cash, a certain portion of the amount paid will be added to the account of the owner of payment cards in bonuses.

Musayeva noted that for taxpayers restrictions may also be introduced on the amount of cash payments in the total volume of the turnover or in a single transaction.

For example, if the amount of a transaction exceeds five thousand manats, the funds in excess of this amount must definitely be paid only in non-cash form. Otherwise, the taxpayer will not be able to include these payments in their costs and might face a penalty.

It should also be noted that in the draft law, the restrictive measures do not apply to objects of retail sale of food products, including bakery products. At the same time, it is planned to introduce a large amount of benefits for these facilities to encourage the use of non-cash payments.

The country's fiscal department is confident that this bill will provide a major breakthrough in the development of non-cash payments in the country. After all, these measures have three objectives: encouraging cashless payments, which will allow people to earn bonuses, increasing the efficiency of taxes paid by employers, and this will involve incentives, while the state will be able to specify the tax base in the country as a result of the reduction of the share of the undeclared economy.

The programme of the Central Bank

For its part, in early 2013, the Central Bank of Azerbaijan (CBA) offered a five-year state programme providing for comprehensive measures to develop and promote non-cash payments. It has also already been presented to the government.

The director of the CBA department for payment systems and settlements, Kamala Qurbanova, noted that the programme provides for activities in a number of ways - expansion of infrastructure capacity for electronic payments, strengthening of the regulatory framework for electronic payments, the active involvement of the public and businesses in the use of the existing infrastructure and the population's awareness. Moreover, the Central Bank also proposes exempting certain types of purchases made via the Internet and paid electronically from customs duties.

This is the second state programme - in 2005 the president issued a decree to adopt a state programme for the development of payment systems, in which certain measures were taken, including, the installation of POS-terminals at all facilities in the country by 2015.

According to the results of a survey conducted by the Ministry of Taxes, compared to previous years POS-terminals have been installed in many facilities, and they are used in commercial operations. The installation of POS-terminals in London taxis and public transport also began last year.

Also, a big plus for the development of non-cash payments is the existence of five processing centres and the introduction of new payment systems. In addition, it is possible to make various payments in more than 800 branches of the national postal operator - Azerpost. In September, the Central Bank will launch a portal of state payments, which is being created on the basis of a centralized information system for mass payments (APUS - Automated Payment Utility Service). If earlier it was possible to pay only for public utilities there, now natural and legal persons will be able to pay for almost all types of public payments. The Central Bank has also developed a draft law on electronic payments.

Unfortunately, despite all efforts, for the time being the share of non-cash payments in Azerbaijan is still low and makes up only 7.6% of all payments. The cash turnover still prevails, and it is influenced by many factors - the desire of businessmen to evade taxes, the existence of the shadow economy and the lack of the population's awareness of the benefits of electronic payments. Therefore, the main objective of the proposals and the second draft state programme is to eliminate these factors and develop the appropriate infrastructure, which will eventually help increase the share of non-cash payments in Azerbaijan to the international level.