Government increases VAT, promising to raise wages and pensions in Kazakhstan

Experts predict that the VAT hike will lead to a 4.5% increase in the cost of goods and services / Photo: Askar Akhmetullin, photo editor: Milosh Muratovskiy

The Ministry of National Economy of Kazakhstan plans to raise VAT from the current 12% to up to 20%, according to Minister Serik Zhumangarin. Speaking at a press briefing following a cabinet meeting, he acknowledged that the increase would impact prices but assured that the government is taking measures to mitigate its effects.

«We have not yet decided whether the new VAT rate will be 16% or 20%. Naturally, this will have consequences. Our calculations indicate that the increase will add an average 4% cost burden per entity, which will inevitably be passed on to consumers. Inflation could rise by up to 4.5% as a result, and we are actively working on measures to offset this,» Zhumangarin stated.

The government expects the price surge to be temporary. To protect vulnerable groups, it plans to expand targeted social support programs. In particular, authorities will adjust pensions and salaries for public sector employees.

The minister also emphasized that the VAT increase would stimulate economic growth and job creation, as additional tax revenue will be reinvested in the real economy.

«To achieve this, we must enforce strict fiscal discipline. We have already launched a digital investment platform where all key projects are being monitored. Our focus is on ensuring efficient allocation of public funds and preventing wasteful spending,» Zhumangarin added.

To ease the tax burden on businesses, the government plans to reduce employer contributions by removing the social tax and mandatory pension payments if VAT is raised to 20%.

«There are certain expenditure categories in the salary budget that we intend to eliminate. If we cannot reduce these costs, we will reconsider the extent of the VAT increase. However, we will not cut expenses directly affecting wages. These are critical budgetary decisions that require careful analysis,» the minister explained.

The cabinet will submit the VAT increase proposal to parliament by Feb. 20 where it will be reviewed as part of the new Tax Code. Additionally, the Ministry of Economy plans to hold consultations with the business community to discuss the reform.

To broaden the tax base, Kazakhstan’s government also plans to lower the VAT registration threshold from $151,834 to $28,975. The reform is expected to increase tax revenue by $9.6 billion to $13.5 billion. For comparison, total tax revenue in 2024 amounted to $23.7 billion.