Kazakhstan has passed legislation on its latest bid to legalise shadow capital and property, as well as moves to clamp down on money laundering, as part of a plan that ultimately seeks to make the country more attractive to investors.
Kazakh President Nursultan Nazarbayev on June 30 signed a bill that will allow the legalisation of shadow capital and property starting on September 1. It will run until the end of 2015. Astana says it hopes the 16-month campaign will bring as much as $12bn out of the grey economy.
The move is part of a wider effort by Astana to bring greater transparency to the country's capital flows. Nazarbayev also signed amendments to legislation on Kazakhstan's ratification of the EU's anti-money laundering convention, which if finally joined in 2011 - close to a decade after it first applied.
Money legalised during the campaign will be deposited in special savings accounts at commercial banks, or invested in domestic assets, Deputy Prime Minister and Finance Minister Bakhyt Sultanov told a news conference when plans for the amnesty were first announced in May.
Kazakhs will be able to deposit their previously illicit cash for five years at market interest rates (up to 10.5% for tenge-denominated deposits). Alternatively, they will be able to invest it in government securities, bonds issued by banks and state companies, shares floated as part of the "People's IPO" programme and stocks traded on the Kazakh Stock Exchange. Those wishing to get their hands on hard cash sooner will pay a penalty.
"In future citizens themselves will choose an instrument of legalisation. If a citizen legalising money doesn't want to use available mechanisms of investment, they can dispose [of] their money as they wish," Sultanov said. "If they withdraw this money they will pay a levy worth 10% of money legalised."
Legalised money and property will be exempt from income tax. The law rules out the legalisation of property and money received as a result of criminal or corrupt activities.
Sultanov said he expects to see $10-12bn emerge from the shadows. According to government estimates, the grey economy equates to around 20% of the official economy. Kazakhstan's GDP stood at $221bn in 2013.
That's despite two previous campaigns to legalise shadow capital and undocumented property. The first amnesty in 2001 saw around 3,000 Kazakh citizens legalise a total of $480m in a 20-day campaign. In 2006-2007, $5.3bn ($3bn in money and $2.3bn in property) was declared.
The ultimate aim is to help attract additional funds and investment to the economy, Finance Minister Bakyt Sultanov said according to local media.
The Kazakh parliament adopted a new criminal code on June 11, toughening punishment for money-laundering, income from illegal activity and terrorism funding. The hope is that the toughened measures will encourage a greater uptake of the legalisation campaign. The new criminal code has now been sent to the president for signing.
In March, the Kazakh financial police announced it is to step up efforts to clamp down on capital flight to offshore accounts and to improve transparency over ownership. Olzhas Bektenov of Kazakhstan's Agency for Combating Economic Crimes and Corruption added "the lack of transparency in the structure of ownership in strategic Kazakh companies," is also a pressing problem. "Currently, the identification of the ultimate beneficiary is not possible," he said.
In February, one Kazakh deputy proposed the country should create its own offshore zone, in a bid to keep capital from leaving the country. "Kazakhstan invested $3.6bn in the Virgin Islands, $2.6bn in the Seychelles, and $1.9bn in Cyprus," claimed Tursunbek Omurzakov, according to Trend.
The MP also noted that a Russian plan for an offshore zone in the far east creates additional risk of capital flight, as there will be no restriction on money flows within the Eurasian Economic Union. "We should work with such countries: sign agreements and exchange tax information," he demanded.
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