Azerbaijani tax official accuses supermarkets of tax evasion

By bne IntelliNews April 28, 2016

Azerbaijan's Tax Ministry has accused supermarkets of evading taxes by taking advantage of the government's decision to reduce the number of audits at private companies almost to zero since January in order to lower pressure on private companies. The decrease in the number of inspections since January has resulted in an unspecified decline in tax collections from various sectors, including retail, according to Elshan Huseynov, an official at the Tax Ministry.

The statement comes a few days after Azerbaijani supermarkets asked the ministry for tax breaks to offset the lower demand they have experienced since a double devaluation of the Azerbaijani manat in 2015 sent inflation skyrocketing and consumer demand plunging. In light of a steep decline in oil prices since 2014, Azerbaijan has been seeking to increase tax collection as an alternative source of funds to the state budget. Tax evasion is widespread in Azerbaijan. Sources in Baku tell bne Intellinews that supermarkets "only pay tax on 20% of their revenues". However, the government is stuck between a rock and a hard place, as it is seeking to mitigate the effects of the oil and devaluation crisis on private companies, but needs to increase tax collections at the same time.

"It means that the entrepreneurs of this sector do not want meet their tax obligations in a voluntary manner," Huseynov said. He cited the example of a large supermarket chain that had understated its taxes sixfold in February, and did not indicate any revenue for March despite the fact that the month of March is normally a busy time for Azerbaijani retailers thanks to the celebrations of the Persian New Year festival of Nowruz.

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