Kazakhstan macro: ambitious VAT reform to reduce republican budget dependence on transfers, exchange rate
The Kazakh authorities accomplished the fine-tuning of the tax reform with the intent to reduce the dependence of public finances on the USD/KZT exchange rate and oil prices. We mentioned previously that the main emphasis of this reform is not just the VAT hike but also how the tax should be paid. The key idea was to significantly reduce the threshold for businesses exempt from the VAT. Previously, many big companies didn’t hesitate to formally break their businesses into smaller entities, thus obtaining a legal excuse to avoid paying the VAT. The latter is paid to the republican budget, which is the backbone of the country’s budgetary system. In 2025, VAT accounted for 42.3% of tax revenues and 29.0% of the total budget revenues. As a reminder, the latter also include transfers (from the National Fund mainly), non-tax revenues (such as dividends from state-controlled businesses), and sales of fixed capital. Apart from the VAT, tax revenues include corporate profit tax, excise, mineral resource taxes, foreign trade duties and a few smaller items.
In 2026, the government expects the VAT share could reach 53.0% of tax revenues and 43.7% of total revenues as transfers from the National Fund decrease even in nominal terms. The tax reform is supposed to decrease not only the dependence of the republican budget on external factors such as oil prices, but also to top up the National Fund more than it used to in recent years. Economic and financial statistics for January 2026 will provide more color on the impact of VAT reform on the budget and the economy in general. In about three weeks from now, these data will gradually become available and 2026 outlook could be clearer.
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