Kyrgyzstan: Fury Over Sales Tax

Monday, 21 February, 2005

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Gulnura Toralieva

Kyrgyz traders are furious over the government’s recent decision to introduce a new sales tax and make the use of cash registers compulsory in open-air markets.

The move by the trade and industry ministry sparked a four-day strike in one of the largest markets in the capital Bishkek, and further protests are expected.

But the government is adamant that the activities of merchants at Kyrgyz open-air markets should be controlled by the state and be subject to tax.

“We have failed to control this sector of the so-called unofficial economy for too long,” Deputy Prime Minister Joomart Otorbaev told IWPR.

“We have given merchants and shuttle-traders enough opportunities to develop. If we allow traders’ turnovers to remain free of tax, the salaries of teachers, doctors and police will always remain shamefully low.”

The authorities had introduced legislation requiring the use of cash registers in the mid-Nineties, but traders had largely ignored it. The law only began to be rigidly enforced at the beginning of October.

The merchants have only a few short months to adapt to these changes - they will then face fines if they fail to comply.

Traders at the capital’s Dordoi market took down their stalls and packed up their wares on September 29 in protest at the government’s move, returning to work on October 2.

Anatoly Novikov, chair of the Dordoi market trade union, told IWPR that while the strike had not won concessions, it had nevertheless had an impact. “Losses were suffered by the traders and local taxi drivers, but did you also notice how the exchange rate for the dollar rose sharply?” he asked. “This was the result of these hasty decisions made by state officials.”

Many traders believe that it is not possible to operate cash registers properly in the open air because they’re affected by the changeable weather and the market’s frequent power cuts.

Merchants and economics alike are arguing that cash registers are not the solution, and do not guarantee that the authorities will be able to keep track of stallholders profits.

One experienced accountant, who spoke on condition of anonymity, told IWPR that some traders were already getting round the new system. “Some have learned to put double ribbons into their cash register - one for the customer and the other to show the tax inspectors,” he claimed.

Analysts believe that the new sales tax is highly unpopular largely because of the widely held belief that it will disappear into officials’ pockets rather than the state budget.

Traders argue that they are already giving enough money to the state, as they have to buy sale of goods licenses, expensive trading stalls or pay rental fees, and are charged customs excise on their goods.

Anna Katulevskaia, who owns a stall at the Dordoi market, said, “Two months ago the license fee doubled, and now they are forcing me to buy a cash register and pay a sales tax.

“The state wants to make us bankrupt. If the decree is not abolished, it will not be profitable for people to work.”

The new levy is particularly galling for the traders because they buy their goods from wholesalers who charge them 20 per cent value added tax.

Many will now be forced to raise prices, which will make life especially hard for a good number of their shuttle-trader customers who sell Dordoi merchandise across Central Asia.

Shuttle-trader Vera Shablykina, who is the soul breadwinner for her family, now fears for her future. “In Dordoi, I buy towels from India, shoes from Turkey and women’s dresses from Korea and sell them in Siberia,” she said.

“If prices rise even higher to cover this new tax, my business will simply become impossible. It does not make sense to carry such huge bags on such a long journey through Russia, risking my health for the sake of miserable earnings.”

Natalia Domagalskaia is an independent journalist in Bishkek. Gulnura Toralieva and Dina Maslova are students at the Kyrgyz-Slavonic University.