Experts: Current System of Calculation of Payments for Social Insurance of Individuals Should Be Canceled

Baku / 07.07.19 / Turan: With the growth of the minimum wage in the country, mandatory social insurance payments for individuals engaged in entrepreneurship also increased.

Recall that payments in this category make up 20% of the minimum wage.

So, while at the beginning of 2019, the payments amounted to 26 manat, then from the first of March they reached 36 manat, and from the first of September they will be 50 manat. In fact, entrepreneurs are increasing social security payments, while their incomes remain at the same level. Theoretically, the minimum wage can be increased up to 1,000 AZN. In this case, the payments will amount to 200 manat. To this should be added a noticeable increase in tax payments after the recent changes to the Tax Code (most taxpayers paying 4% under the simplified system were transferred to the category for which they already pay 5%) and the 1% deduction rule introduced several years ago when cash is withdrawn from the account. It turns out that individuals engaged in entrepreneurship spend most of their income on mandatory payments.

In the comments for Turan, economists expressed their opinion on the proper regulation of this issue, so that the increase in the minimum wage does not have a negative impact on individuals engaged in entrepreneurship.

Thus, economist Vugar Bayramov noted that a fixed amount should be applied, for example, 35 manat.

"At present, it is expedient to revise the accounting system. The connection between the minimum wage and the amount of social insurance payments should be removed. If you fix a specific amount, with an increase in the minimum wage, social insurance payments will not grow," he said.

And economist Natig Jafarli believes that instead of a fixed amount, a system of alternative pension funds should be introduced.

"Currently, the state has a monopoly on it and only the state fund functions. It should open the way for private pension funds to provide citizens with alternatives. In this case, pension funds will offer different packages, and the citizen himself will already have the right to choose between them," he said.

According to him, if a citizen wants to receive more pensions, he will pay more contributions.

"Definitely, the current system of social insurance payments should be eliminated. From September 1, in connection with the increase in the minimum wage, social insurance payments will also increase. But, it should be noted that even after the first of September the level of the minimum wage will not correspond to the desired mark and therefore there is the possibility of an even greater increase in the minimum wage. However, it should be done in such a way that it does not hurt others, including individuals engaged in entrepreneurship," he said. -71A-