On 24 September 2020 the OECD issued a report on the tax policy review of Kazakhstan. The report covers income tax, social security contributions, value added tax (VAT) and corporation tax. The research was performed before the COVID-19 pandemic began.

The tax-to-GDP ratio in Kazakhstan has been low and sensitive to economic cycles owing to the dependence on revenue from the mineral resources sector. The tax-to-GDP ratio rose gradually between 1998 and 2008 but following the financial crisis it declined,, and this decline continued after 2014 partly due to falling oil prices. The decline in the tax-to-GDP ratio from 27.6% in 2008 to 16.4% in 2017 was also due to economic growth increasing more quickly than tax revenues. The tax-to-GDP ratio is similar to that of the member countries of the Commonwealth of Independent States (CIS) but much lower than the OECD average (34.2%).

Currently the most important taxes in the tax mix are VAT and corporate income tax, with a lower contribution from personal income tax and social security contributions. Taxes on company profits amount to 5.1% of GDP. Oil companies contributed about 35% of corporate income tax revenue in 2017. Taxes on goods and services amounted to 8.5% of GDP. Taxes on the income of individuals amounted to only 1.4% of GDP, while social security contributions represented only 0.4% of GDP.

The review notes that Kazakhstan must reform its tax system to reduce its dependence on resource-related revenues and to strengthen its economic position after the COVID-19 pandemic. Kazakhstan was showing signs of economic recovery before the crisis, boosted by previous tax reforms. Further reform is now needed to strengthen the economy and raise tax revenues necessary to meet expenditure goals and reduce the non-oil deficit.

Kazakhstan relies on revenues from the natural resource sector but a transition is needed to non-resource taxes that could potentially raise additional revenues. A gradual transition to a progressive personal income tax system could address inequality as well as raise revenues over the medium-term. Measures would be needed to strengthen the tax administration and an annual tax declaration would need to be introduced for individual taxpayers. Reform to the taxation of personal capital income is also needed.

The design and administration of the value added tax (VAT) could be improved to raise additional revenues, for example by increasing the VAT rate which is low by international standards. Kazakhstan has scope to broaden the VAT base by reducing the number of exemptions. Newly constructed residential buildings that are brought onto the market for the first time could be included within the scope of VAT. The standard rate of VAT should also be applied to all transactions to and within the special economic zones (SEZs).

The corporate tax base must be broadened, including better targeting of corporate tax incentives. There should be improvements in the design of the simplified tax regimes that are in force for small and medium enterprises (SMEs).