Small Business Under Threat? Deputies Challenge New Procurement Rules

In a formal request to the government, Mazhilis deputies said proposed changes to public procurement rules could limit small businesses’ access to the market and reduce competition. Among the authors of the request were Bakytzhan Bazarbek, Ermurat Bapi and Ekaterina Smolyakova. Prime Minister Olzhas Bektenov disagreed with that assessment in his response and commented on the amendments, Orda.kz reports.

The deputies sent the request against the backdrop of proposed changes to public and quasi-public procurement rules put forward by the Finance Ministry. In their view, the amendments would create additional barriers for small businesses.

The deputies said the new requirements would effectively force suppliers to become VAT payers. At the same time, for many entrepreneurs operating under the simplified tax regime, such status is neither legally required nor economically justified.

According to the authors of the request, businesses are being faced with a choice: either change their tax regime or leave the procurement market. The deputies also warned of possible consequences, including:

• a reduction in the number of procurement participants;
• less competition;
• higher contract prices;
• stronger positions for large suppliers.

They stressed the scale of the issue by noting that more than 29 trillion tenge passes through the public procurement system each year, and access to that market is critical for small businesses. The deputies therefore proposed suspending the adoption of the amendments until a full analysis of their effect on the market is carried out, along with a regulatory impact assessment involving businesses and the Atameken National Chamber of Entrepreneurs.

The government said it did not see a problem.

In response, Prime Minister Olzhas Bektenov rejected the deputies’ concerns. He said the changes do not introduce new restrictions, but merely bring procurement rules into line with the Tax Code.

He referred to a rule under which the cost of goods and services supplied by companies operating under the simplified declaration is not taken into account when calculating corporate income tax. According to the prime minister, this creates a situation in which customers’ taxable income is artificially increased.

To eliminate that effect, the government is proposing to add a financial stability requirement to the procurement rules, including mandatory VAT registration for suppliers involved in large purchases.

At the same time, Bektenov stressed that:

• the requirement applies only to purchases above the established threshold;
• it does not apply to those exempt from VAT;
• small businesses are not deprived of the opportunity to operate outside the procurement system.

He also said the draft amendments have not yet been adopted and will be submitted for public discussion with the involvement of experts and Atameken.

Original author: Alexander Zhdanov

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