Kazak NGOs Squeezed

Monday, 21 February, 2005

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Sergei Duvanov

The Kazak government is planning to tax foreign grants to non-government organisations, a move its critics see as aimed at forcing the closure of bodies that promote human rights and freedom of speech.

The new code will force NGOs to pay taxes on property and transport resources, even if they are not involved in business enterprises. The legislation will also limit the definition of a grant to exclude funds given by foreign charitable organizations, as well as grants given through inter-governmental organizations such as USAID. They will no longer have tax immunity.

Observers believe the new tax code is aimed at closing foreign-funded NGO organisations specialising in developing human rights, freedom of speech and democratic institutes.

"No international organisation will give us financial assistance knowing that half of the money will be taken away by the Kazak state. Western financial help is aimed at supporting democracy in the developing world. Why should 50 per cent of these funds go into the state budget?" said president of NGO Solidarnost (Solidarity) Dametken Alenova.

Kazak President Nursultan Nazarbaev maintains, however, that the new code and a law on transfer pricing are necessary to "protect the economic interests of the state and fill up state coffers, and to allow us to direct additional money towards resolving social problems."

Nazarbaev has repeatedly charged Kazakstan's powerful industrial groups with failing to pay taxes. Producers are accused of selling goods at artificially low prices under the transfer pricing mechanism to affiliated foreign companies. Press reports say Kazakstan has lost one billion dollars through oil exporting companies in this way.

"We need to legally prevent every method used by owners and managers to pump money out of Kazak firms," Nazarbaev told the opening session of parliament. Big businesses, "particularly those working with the country's mineral resources should increase the amount of taxes they pay into state coffers."

A meeting of NGOs on August 28 in Shymkent appealed to Nazarbaev and parliament not to adopt the new code, which it called unacceptable. "It will significantly worsen the position of non-commercial organizations, not only in terms of taxation, but will also create serious difficulties in the work of NGOs as a whole," the meeting said.

A representative of the disabled association in Almaty said, "Even small financial grants provide organisations such as associations for blind and deaf people vital means of survival while the state turned its back on them. We do not believe that money taxed by the state from the grants will be used for the benefit of the public - they will most probably end up in the pockets of bureaucrats."

The collapse of the Kazak economy has led to a huge growth in non-government organisations offering a range of services the state no longer provides. There are now over 100 women NGOs in Kazakstan helping single mothers or mothers with disabled children.

"We [NGOs] support and protect the most vulnerable groups of society and government is trying again to fill up state coffers on cost of the poorest people. Many oil companies were given concessions and NGO's are being squeezed!" said President of the Single Mothers Association Liazzat Ishmukhamedova.

Critics say that many foreign organisations will stop giving grants to Kazak NGOs if half the money allocated is taken by the Kazak government in the form of taxes. This could lead to a significant decrease in the number of NGOs in Kazakstan, an enormous setback to efforts by the West over the last ten years to develop the non government sector and a serious blow to the process of democratising Kazakstan.

Many also believe work will be carried out to create NGOs on grants received from government and inter-government organizations. In short, Kazakstan may become witness to a process which turns independent NGOs into dependent NGOs.

This process has already been employed in the mass media. New laws were introduced which led to the closure of independent television stations and newspapers. In their place others were created, under the control of the authorities and loyal supporters.

The same scheme was again employed in the political sphere. While independent parties and organizations have been subjected to legal, economic and judicial pressure by the authorities, new parties and movements have been created which are under the thumb of those loyal to the government.

Three years ago it could be said the majority of parties in Kazakstan were opposed to the government, but nowadays for every opposition organisation, there are two pro-government organisations. Analysts believe the same process of "substitution" will allow the government to control the majority of NGOs.

Sergei Duvanov is a regular IWPR contributor.