Institute for War and Peace Reporting | Giving Voice, Driving Change

Astana Legalises Dirty Money

The Kazak authorities have sparked controversy by legalising the proceeds of dubious business deals
By Erbol Jumagulov

A controversial campaign to lure capital back to Kazakstan by offering an amnesty to those who placed untaxed profits in foreign accounts a decade ago has caused uproar, raising complaints that the government is laundering dirty money.

The campaign started in May, when President Nursultan Nazarbaev issued the edict giving traders 20 days to return their capital to the country from June 14. After government boasts that the move would bring in 500 million US dollars fell flat, with only around thirty per cent of the amount repatriated, the deadline was extended by 10 days to July 14.

The government also threw in a sweetener in the shape of an unconditional pardon for tax evaders and suspected fraudsters. The National Bank says it finally netted 480 million US dollars.

The aim of the administration was to target untaxed profits made by businessmen and others in the early Nineties through the export of raw materials at low prices and the illegal sale of state property. Finance minister Majit Esenbaev said the authorities wanted to use part of the money for an investment programme and keep the rest in a fund to cushion the economy against adverse influences, such as export price fluctuations.

But opposition parties have lambasted the campaign, pinpointing its alleged contradictions. Amirjan Kosanov, head of the opposition People's Republican Party of Kazakstan, said it did not make sense for the government to invest the proceeds of oil and gas abroad and then try to lure private money back into the country. But the government's drive to get its hands on money stowed away in foreign tax havens has drawn furious criticism from other quarters too, including the business leaders who are supposed to benefit most from its provisions.

"The tax evasion amnesty is a purely political move," said Erlan Karin, director of the Central Asian Agency for Political Studies. "The fact that people who illegally amassed fortunes and stole from the government can now walk free has shocked the community."

Financial experts say the sum netted is far too small to have a real impact on the republic's finances. "Four hundred and eighty million dollars is not the kind of money that could change the national economy in a major way," said Kanat Berintaev, of the Kazak Institute for Strategic Studies.

The acting head of the Association of Kazak Entrepreneurs, Victor Yambaev, said, "This legalisation has done nothing for small and medium-sized business. They don't need any new legalisation. What they really need is a favourable fiscal environment."

Outside the business community, the move has come under fire from activists defending the rights of the poorest groups in society. "The government should instead be thinking of a way to pay back some 50 billion tenge (33 million US dollars), it owes to pensioners," said Irina Savostina, chair of the lobby group, Generation.

Erbol Jumagulov is a regular IWPR contributor