In 2018, additional charges amounted to 64% of the total annual profit of companies.
The Single Deposit Account system motivates law enforcement agencies to receive additional payments from the business by any means because they can keep from 25% to 30% to themselves according to a government resolution. Therefore, there is such a significant increase in additional charges.
At the same time, there is a proportional drop in company profits. Companies either reduce their activity or go into the shadows.
This was announced by IBC Executive Director, Deputy Committee Chairman Askar Sydykov at the second meeting of the Industry and Entrepreneurship Development Committee under the National Sustainable Development Council of the Kyrgyz Republic held at the Ala-Archa state residence on February 12, 2020.
The meeting, chaired by President of the Kyrgyz Republic Sooronbai Jeenbekov, discussed the state of investment protection and the observance of the rights of business entities, legal aspects of decriminalization of economic cases, and enforcement of law in the field of protecting the rights of entrepreneurs by law enforcement agencies.
The event was attended by heads of government agencies and representatives of the country's business community.
In his opening speech, the Head of State spoke about decisions in support of entrepreneurship.
“Askar Sydykov, the Committee Deputy Chairman, and Secretariat representatives visited the regions and exchanged views with local entrepreneurs. Among the urgent and acute problems was the issue of stopping unreasonable business inspections by law enforcement and supervisory authorities. The agenda of today's meeting has been determined by the need to discuss this issue and develop specific recommendations,” the President said.
Askar Sydykov spoke about the factors that hinder the flow of investment into the country, and focused on the activities of fiscal and law enforcement agencies that negatively affect doing business and attracting investment.
As a result of the operation of the Single Deposit Account, entrepreneurs are under pressure from fiscal and law enforcement agencies. Under the threat of arrest, they are forced to pay submitted tax, customs and other debts with which they disagree and which would be subsequently appealed to the judicial authorities of the Kyrgyz Republic.
If the attitude towards bona fide business does not change dramatically, we can expect a further outflow of capital, reduction in investment and withdrawal of legal business into the shadow economy, Sydykov said. In international arbitration courts, there will be more claims by investors whose rights have been violated.
After discussing the speech of Askar Sydykov, the Committee decided to recommend that the Government analyze the funds of the Single Deposit Account and develop appropriate suggestions.
The Committee Secretariat was entrusted, together with representatives of the business community and relevant state bodies, to analyze the current legislation of the Kyrgyz Republic in the field of investment and entrepreneurial activity and to develop suggestions.
Among many other Committee recommendations, the Government was advised not to replenish the national budget with additional taxes without a court decision, as well as to develop an Investor Confidence Index and introduce it into the activities of state bodies.
According to the Decree of the President of the Kyrgyz Republic, Deputy Prime Minister Erkin Asrandiev was appointed the new Committee Deputy Chairman, he replaced Kubatbek Boronov. The Committee also included Robin Ord-Smith, Business Ombudsman of the Kyrgyz Republic, and Farkhad Pakyrov, Executive Director of the JIA business association.