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Kazakhstan's financial authorities have uncovered a widespread scheme where microfinance organizations (MFOs) have been charging customers for non-existent or misleading "guarantees" when issuing loans. This practice allowed these firms to significantly reduce their tax liabilities.

Deceptive 'Guarantees' Uncovered

An investigation by the State Revenue Committee (SRC) of the Ministry of Finance revealed that MFOs were bundling additional services, presented as "guarantees," with loans. While appearing to offer financial security, these services were in reality a form of paid deferral, allowing borrowers to postpone loan payments under specific, often restrictive, conditions.

Investigators found that these "guarantees" were rarely utilized, their terms aligned with loan deferral periods, and they did not impose any real financial responsibility on the MFOs. This created a loophole for the organizations.

Tax Evasion Scheme Detailed

The core of the scheme involved exploiting tax laws. Under Kazakhstani law, only loans are exempt from Value Added Tax (VAT). By disguising paid deferral services as "guarantees" and bundling them with loans, MFOs incorrectly classified these additional charges, thereby avoiding VAT on a significant portion of their income.

The SRC estimates that this practice has led to unpaid VAT totaling 6.1 billion tenge (approximately $13.5 million USD).

Broader Investigations Underway

The investigation also identified suspicious operations worth 26 billion tenge (approximately $57 million USD) related to insurance agency services. Authorities suspect similar tax evasion tactics may have been employed in these cases as well, and further scrutiny is ongoing.

The SRC emphasized that these types of schemes are prevalent across various sectors of MFO operations. The committee is committed to ensuring that financial transactions are taxed according to their true economic substance, preventing attempts to reclassify taxable services as tax-exempt benefits.

This revelation highlights the need for greater transparency and consumer protection within Kazakhstan's microfinance sector.

This information was reported by Infohub.kz.