A draft law on the introduction of real estate tax in Kyrgyzstan has caused heated debate in the Kyrgyz parliament. The Cabinet suggests introducing a tax on production, official, and residential buildings to the amount of 1.5% of their market cost. This measure is intended to raise additional funds for the state budget.
"By introducing the real estate tax, the state wishes to get money to the budget," thinks Anarbek Usupbayev, director of Stroimechanizatsiya (Construction Mechanization) company. "However, the effect would be short-term and in the not-too-distant future this tax would result in a situation when many currently operating production companies would cease to exist."
For a large number of non-working production enterprises in Kyrgyzstan, the new tax would mean speeding up towards bankruptcy and their sale by parts. The evaluation commission would have the right to evaluate the cost of real estate at its own discretion. So a plant's cost could be evaluated at hundreds of thousands and even hundreds of millions dollars.
"This would create a fertile soil for corruption," said Usupbayev. "It is the evaluation commission that will be the winner, dictating its conditions to production companies. The new tax would only encourage the further sale of the country's production facilities. My company owns the largest construction crane fleet in Kyrgyzstan - more than 50 (including two unique cranes capable to construct buildings of 150 meters high). After the real estate tax introduction, we would have to sell these cranes, to make both ends meet. Many other production enterprises in Kyrgyzstan would do the same. As a result, in some 5-6 years, the country would have none of the enterprises that are currently operating …Everything would be sold off ..."
Kamchy Parmankulov, chairman of the board of KBI (the former Setun plant), is more optimistic. In his opinion, the real estate tax must take into account the interests of the operating production enterprises. This tax can be approved because Kyrgyzstan has too many non-working enterprises whose owners have, to be frank, misappropriated many production and office buildings…
Parmankulov thinks the new tax would make such owners forfeit these premises, which should go to those, willing to work and use this real estate according to its purpose.
Time will show whether the Kyrgyz government achieves this goal by introducing the new tax or completely destroys the Kyrgyz economy.
By Zamir Osorov, The Times of Central Asia, March 27, 2003