Opinion on State Budget for 2016 Issued

The JSC Assistance to Economic Initiatives (AEI) has once again prepared a conclusion on the state budget. The paper expresses the view that to fulfill the state budget will be very difficult in a low oil price, which is the main source of income (7.79 billion manat, or 53.5% of the revenue side).

With forecasts of oil prices at a level no higher than $ 35, budget revenues are determined at the rate of $ 50 per 1 barrel. Therefore, for the timely and full implementation of the costs it is required to implement a series of reforms: improving the business environment, elimination of business by officials, monopolies and illegal barriers to the import of goods, promotion of competition, etc.

In its opinion AEI experts say that the state budget for 2016 does not consider sufficiently decrease in oil revenues to generate income from non-oil sector. The fact is that this factor will affect the reduction of state orders as well as orders from oil companies to the private sector. However, the government expects, for example, by subcontractors for PSA projects, to increase tax profit by 38.3 million manat in comparison with the 2014 year.

Reduction of state-funded public investment by 2.7 billion manat will necessarily lead to lower payments of profit tax and VAT by local companies. However, the government expects revenues from income tax at the level of 670 million manat, or 17.1% more than in 2014. The same is for the positive plans for the collection of income tax from individuals. "In the context of the expected decline in business activity and job cuts, it is an unreasoned approach to the drafting of the main financial document of the country," the AEI conclusion on the state budget for 2016 says. ----08D