Reuters

Reuters

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- Gubad bey, Minister of Economy, Mikayil Jabbarov, proposed a capital and property amnesty for the private sector in a meeting with President Ilham Aliyev. What do you think is the purpose of making this proposal in the current situation?

- The current socio-economic situation in Azerbaijan is more similar to the situation at the end of 2014. True, there were no problems with Coronavirus at that time. However, it is possible to compare these periods against the background of falling oil prices on the world market. The point is that two serious works need to be done in the country at the moment. The first is to increase the rationality and efficiency in the use of public funds as a whole. This requires a budget austerity mode. The second, I think, is to find more additional financial resources, especially through the mobilization of these resources through domestic capital and property amnesty. The first direction, the austerity mode, is a good approach in itself, but it cannot last indefinitely. Because it is impossible to use all the projected individual directions of budget funds in austerity mode. But in any case, it is very important to have an austerity mode. It seems that Azerbaijan now wants to mobilize both. Also, it wants to switch to austerity mode. Although at least the introduction of compulsory health insurance is expected to be completed by the end of 2020, it has been postponed to next year. This is one of the works done within the austerity mode. At present, it is very important to expand business opportunities and create additional financial resources. Therefore, amnesty is usually the first thing that comes to mind when such a post-oil conversation takes place. In the past, a tax amnesty was also announced. In general, tax amnesty is more needed now than capital and property amnesty. Because the tax legislation has been amended and tightened under unfavorable conditions, and tax evasion has increased significantly. In the past, against the background of unfounded inspections and unfair fines, such tax debts of small and medium enterprises and even large companies were formed. That is why there is a need for more tax amnesty. As for the capital amnesty, of course, it is also important for financial security. Today, people whose investment has been delayed for some reason and who are generally worried about investing may perhaps legalize their capital and invest in the economy after this amnesty. However, the prospects for this in the current conditions are not so visible. Because investors are not interested in investing in such an uncertain situation, even with an amnesty. But as for property, in this case, there was a case of forced, violent seizure of the property of another group by one group in Azerbaijan. This is called expropriation in economic language. From this point of view, the property amnesty, in this case, may make a small contribution to the resolution of existing disputes.

- In general, will this step have a positive impact on the elimination of the shadow economy and corruption in Azerbaijan?

- I do not think that this step will lead to the legalization of the shadow economy. But, of course, if the capital resources released as a result of the amnesty are fully or partially legalized, if the reporting of declared assets is stimulated, if the capital exported is returned, it can, in a sense, lead to a reduction in the size of the shadow economy. As for corruption, the most effective tool against corruption today is, as a whole, the adoption and publication of declarations on the property and income of public officials, including judges, prosecutors, deputies, and even the president, vice president, prime minister, and ministers. There is more need for this. Perhaps, in the current situation, in terms of the words of Ilham Aliyev, based on the beginning of the post-oil era and the capital and property amnesty initiated by the Minister of Economy, perhaps after this stage, there will be a transition to the declaration of income and property. It can be seen as a preparation for the declaration of income and property, where capital and property are already legalized, and then they declare that this is the amount of property and capital they really have. In any case, this could be the beginning of a new phase in the fight against corruption.

- For years, experts have been talking about financial amnesty to prevent the removal of illegal, dirty money from the country. But it falls on deaf ears. Does capital and property amnesty mean financial amnesty?

- When the investment environment in the country is unfavorable and the realization of the stolen capital in the country, at the same time, raises certain questions, the owners of capital try to take it abroad. The same cannot be said with regard to property. Because the property is not movable in any case. Because it is real estate, it definitely stays in the country. But there are many who take their capital out of Azerbaijan. From this point of view, it would not be bad to establish a certain activity in this direction. I have always been in favor of announcing financial and tax amnesty. But I think we need more tax amnesty. Starting with a clean slate for taxpayers can play an important role in eliminating tax arrears as a whole, reducing tax liabilities, and shaping the culture of taxpayers. But in the current economic situation, there are certain difficulties. In any case, this will affect any amnesty decision, including the capital, tax, and property. This may simply be a very interesting initiative to identify additional internal sources of funding in the current situation, which the Azerbaijani economy will really need in 2020. Because to raise funds to the budget only with activities and gains may create problems in the fulfillment of obligations taken, especially social obligations. Therefore, making a profit from idle capital and property and involving it to the sphere of activity by legalizing it can become one of the financial sources internally.

- Will the announcement of this amnesty now affect raising the economy?

- Raising the economy is not on the agenda now. At present, the main issue may be to prevent the recession of the economy or let's say if there is a recession, to limit its scope. In any case, the world economy is also in recession. In any case, Azerbaijan's economy, especially as a peripheral country with a commodity-dependent economy, will be on the list of countries most affected by the recession. That is why we are not talking about raising the economy. We can talk about reducing the scale of the recession. In this regard, the idea of amnesty is voiced. Because the period of sustainable development is over. Now, unfortunately, the countries of the world, including Azerbaijan, are forced to face negative consequences in 2020 as a result of their activities.

- What do you offer? What needs to be done to get the economy out of the current situation, especially out of the current pandemic crisis? Can amnesties, transparency, judicial independence save the economy from this situation? Or is it needed to take deeper steps?

- I propose to increase transparency and accountability. Of course, the fight against corruption and monopolies must also be strengthened. There will be a need for more transparency this year to ensure rationality, efficiency in the budget, and the use of the budget in austerity mode in general. If we take into account that this year's budget also allocates large enough funds to the final destination costs, separate directions determined by the executive power, the non-transparent use of those funds will ultimately reduce the efficiency of using the total resources collected in the budget. Therefore, transparency is definitely needed. In the current period, we must try to take into account the impact of decisions on the economy. Because the spread of the pandemic requires decisions that are particularly counterproductive to the economy.  In particular, the quarantine regime and the emergency activity regime restrict the movement of resources. It also affects financial and human resources, business, transportation, including imports and exports. In this regard, we should try to localize it in any case and not apply it across the country. Because when applied across the country, the country as a whole suffers from this process. However, its application in some regions, in a sense, creates conditions for the movement of funds, financial security, and areas that are important today at the expense of the resources of other regions. However, the most important issue today is the transparent and accountable spending of funds raised in the support fund to combat the pandemic. In general, state security must be implemented in a situation where there is a danger of the collapse of small and medium enterprises as a class. And there is no doubt that the independence of the judiciary can have a positive effect on these processes, as well as on transparency, accountability, and investment. That is, first of all, the state must think of its citizens and entrepreneurs and take care of them to be able to restore the country's economy after the situation changes.

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