Recreation center pays less than 7 AZN (4 USD) in taxes per month
"Legislation that makes information about tax payments a commercial secret should be amended"
Recently, a group of people clashed at Relax Recreational Center in Lerik. A video of the incident has been circulated online since. Shared with the title, "MP Igbal Mammadov's men beat tax officials at Relax Recreational Center", the video shows employees from the recreational center arguing with people in plain clothes and saying that they wanted to take their bread away from them. The verbal argument at one point turned into a brawl, and police officers were called to the scene to prevent it from escalating further.
Famil Karimov, deputy director of Relax Recreational Center, did not deny that the Tax Ministry had begun periodic tax inspections at the recreational center on 15 August. However, he said, the fight in the video was between tourists. Later, the Tax Ministry, the Interior Ministry and the Prosecutor-General's Office released a joint statement on the incident that took place at Relax Recreational Center.
The statement confirmed reports that six people, including MP Igbal Mammadov's son Mirhamid Narimanli, had been arrested. The law-enforcement agencies said that a tax inspection had been planned for 16 August at Relax Recreational and Tourism Center that operates in Lerik.
“The reason for the inspection was a dramatic decrease in taxes paid to the state budget by the recreational center. Although there are 20 different kinds of facilities at the recreational center, which has an area of more than 14 hectare and 142 guest rooms, it only paid 10,726 AZN (6,290 USD) in taxes in 2018 and has only paid 972 AZN (570 USD) so far in 2019. Additionally, although Relax Recreational Center has a single management system, the facilities there had been registered in different taxpayers' names, and several facilities operated without registration with a tax authority.”
According to the economist Vugar Bayramov, an official statement states that Relax has only paid 972 AZN (570 USD) in tax in the first seven months of this year. This means that each facility at the recreational center, which has 20 facilities, paid an average of approximately 50 AZN (30 USD) over that period. Furthermore, each facility paid an average of even less than 7 AZN (4 USD) in taxes per month.
According to Bayramov, the ridiculously low amount of monthly tax payments made by the recreational center that charges fairly high prices and is often visited not only during the high season but in other months as well shows the scale of the underground economy and how important it is to fight it:
"It is obvious that Relax was not the first company to pay little tax and that it will not be the last one either. The Tax Ministry's principled position on this matter is commendable."
Bayramov adds that there is clearly a need for tax code compliance from businesses enjoying political patronage. He believes that the sustained development of the non-oil sector depends on two factors: how efficient the fight against the black market will be and on whether "patronage" will be eliminated in the real sector.
Economist Gubad Ibadoglu, who is the chairman of the Democracy and Welfare Movement, also believes that information about how much tax every company pays should be publicly available, noting that Relax paid less taxes than a hairdresser, a shoemaker, or a tailor, or even less that a one-time fine paid by a driver for crossing a traffic lane or by a pedestrian for incorrectly crossing the street:
"The incident in Lerik - which involves Relax, at which I cannot afford to holiday even one day because prices are so high - shows that even recreational centers can make it difficult for state agencies to do their job. In that case, tax inspectors are very unlikely to be able to even walk around holdings and major companies. This event shows that there are thousands of these kinds of companies in Azerbaijan which enjoy the patronage of MPs, officials, prosecutors, judges, police chiefs and which do not even pay much money into the state budget at all and do not let tax inspectors enter facilities that they own."
Ibadoglu proposes two options to resolve the problem. He says that first, the legislation that makes information about tax payments a commercial secret should be amended to be made publicly accessible:
"The practice whereby people who hold political and elected posts in state management, and their families run businesses, should be ceased. One of the key things to do to this end is to declare and publish incomes and properties."
Ibadoglu believes that one of the reasons for the lack of a tax-paying culture in Azerbaijan is corruption and poor management by regulatory fiscal authorities:
"There is no doubt that along with the official amounts of money stated to have been paid by Relax Recreational Center, there have also been undisclosed monthly unofficial payments. However, nobody is talking about that for some reason."
The official statement released regarding the matter says that charges were filed within the framework of the case against senior persons who carried out organizational, executive and administrative functions at the recreational center - Mirhamid Igbal oglu Narimanli, Orkhan Chingiz oglu Narimanli, Parviz Avazovich Asgerov, Famil Kamran oglu Imanov, Rahim Bahlul oglu Shahverdiyev, and Amir Nagizada oglu Abbasov. The charges were filed under the Criminal Code's articles 309.2 (which refers to exceeding one's powers, which results in grave consequences) and 315.2 (which refers to the use of force against government officials that is dangerous for their lives and health), and a court has issued arrest warrants against the persons listed.
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