Taxes will be levied on "mineral water" and juices

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Manufacturers of soft drinks, juices and mineral waters can go bankrupt.

This statement was indicated in the appeal to NCE RK "Atameken", where manufactures addressed for help.

The fact is that the Committee of State Revenue of the Ministry of Finance of the Republic of Kazakhstan from September 1 intends to adopt by-law, according to which manufacturers of soft drinks and juices, engaged in the extraction of groundwater for production and sale of drinking water and soft drinks, have to pay tax on mineral extraction (tax on mining minerals).

According to the Executive Director of the Association of producers of soft drinks and juices of Kazakhstan Aliya Mamytbaeva today producers of soft drinks experience enormous selective pressure from the tax authorities.

"Since 2014, there has been a consistent and steady pressure on the enterprises of the sector from the tax authorities, who have been sent notifications on the need to recalculate the tax on extraction of mineral resources. However, the tax authorities don’t take into account a long-term procedure of calculation and payment of the severance tax for the extraction of groundwater, which is used by all subsoil users of Kazakhstan and has been approved by the competent authorities during contracting, including, in the course of tax audits of manufacturers by the tax authorities.

Until recently, the severance tax was calculated based on the actual current production cost of extraction and primary processing, increased by 20% in accordance with the laws of our country", - said the representative of the association.

Currently, however, says Aliya Mamytbaeva, the tax authorities, without waiting for the decision of the Parliament, insist on the calculation of the tax based on the weighted average selling price of the finished product - bottled drinking water.

Manufacturers, however, consider the requirements of fiscal bodies as unfounded.

"The average selling price is used for the sale of groundwater. However, our company does not carry out sale of the groundwater, and sells the finished commercial products in the form of soft drinks and bottled drinking water. The selling price of the finished commercial product includes not only the costs associated with mining (underground water), but also the cost of production of a finished marketable product, other costs associated with marketing and sales, administrative costs, which are not part of dredged from the depths minerals, and therefore can’t be subject to taxation. Thus, the tax authorities violate the principle of tax certainty", - say entrepreneurs.

According to them, fiscal body literally interprets the term "water" and doesn’t distinguish between minerals (groundwater) and the final food product (bottled water), which refers to a food product.

By the way, the reason for such action was the trial between the tax department and the company "Asem-Ai" on the recalculation of the tax on the basis of the weighted average selling price of the finished product - bottled drinking water, which, alas, won the fiscal body.

"As evidence to support its position the tax authorities in the case with the company" Asem-Ai "and others, used the opinion of the Russian expert of the Russian Academy of Sciences. There arises another lawful question in this case: why as a justification the tax authorities in Kazakhstan use the conclusion of the Russian Academy of Sciences, but not the one of the competent authorities of Kazakhstan? "- the head of the association of manufacturers of soft drinks and juices asks a reasonable question.

According to her, the actions of the tax authorities, requiring entrepreneurs to recalculate the severance tax (the tax on extraction of mineral resources), may lead to the bankruptcy of most of the industry, and therefore the continued existence of non-alcoholic industry in Kazakhstan is a big question.

In this regard, the Association of manufacturers of soft drinks and juices made a number of proposals. Thus, in their view, based on the data analysis of the industry, a reasonable average rate of the severance tax on groundwater for 1 cubic meter produced water should be between 3% and then increased up to 5% of MCI.

According to manufacturers, the Ministry of Finance in establishing the rate does not include the value of the business, as well as the difference in sales volume and profitability of the enterprise, the seasonality of products, highly competitive environment, the difference in the taxable base of the CU, the forthcoming entry of Kazakhstan to the WTO.