If Law on Limitation of Cash Payments Works, Corruption Can Be Eliminated - Gubad Ibadoglu

The law on the limitation of cash payments should be welcomed, but there is a fear whether the law will remain just on paper, economist Gubad Ibadoglu said.

According to the law, a limit will be put on cash payments in the amount of 30,000 manat for objects of trade and public catering registered as VAT payers, whose annual turnover exceeds 200,000 manat. The limit for all other taxpayers is 15,000 manat a month.

Points of law for taxpayers with an annual turnover above 200 thousand manat are to take effect from 1 January 2017, and for the rest ones - from April 1, 2017.

“Entrepreneurs, especially those who work on the basis of major public contracts, are worried because of the restrictions imposed,” he said.

The expert noted that for anybody it is not a secret that ministries and other government agencies gave orders to friendly contractors, and those in turn gave them to subcontractors friendly to them.

He stressed that kickbacks from these processes account for about 25-30%, all in cash. In addition, an informal supplement to the salary in the package form is also payable in cash.

According to him, in this case one can predict two options.

“According to the first option, the system of kickbacks to fulfill state orders and "packages" are canceled and tenders for entrepreneurs are held in conditions of transparency. The probability of this option is very small, but it can play an important role in eliminating corruption and promoting entrepreneurship in the economic crisis,” he said.

Ibadoglu said the state budget for 2017 approved construction costs at the level of 2.5 billion manat.

“If this option is going to work, it can eliminate corruption and bribery operation for a total amount of 500 million manat,” the economist said.

According to the second option, kickbacks for government orders are cashed by the new rules, and calculations, despite the progressive law, are conducted under the old rules, that is, in cash. This will ensure the duration of corruption.   -----71D