In a bid to reduce its dependency on the oil and gas sector andfoster economic diversification, Azerbaijan is set to undertake acomprehensive review of its tax policy, according to a recentreport by Fitch Solutions.

The international credit ratings agency forecasts a significantrise in GDP per capita for Azerbaijan, predicting an increase fromUSD 8,612.0 in 2023 to USD 16,999.0 by 2033, citing potentialupside risks stemming from currency stability. This positiveoutlook underscores the nation's commitment to steering its economytowards sustainable growth.

"We expect nominal rising incomes and consumption to providesome support for the diversification of the economy away from theoil and gas sector. These factors will be particularly importantfor the sustainability of the economy over the long term, as anoverreliance on energy exacerbates the risks of Dutch disease. Thegovernment is aware of the need for economic diversification andplans to introduce several measures to mitigate this risk," FitchSolutions noted.

Key among these measures is a fundamental restructuring of thenon-oil tax policy, including the introduction of a flat tax systemand a reduction in the value-added tax (VAT). These changes aim tocreate a more conducive environment for the growth of medium-sizedcompanies, thereby promoting a more diversified economiclandscape.

"In addition, the government currently has several ambitiousplans to improve infrastructure, particularly in energy andtransport. These factors will aid the development of a competitivenon-energy sector, which will support economic growth," the agencyadded.

The emphasis on infrastructure development aligns withAzerbaijan's broader strategy of modernizing its economy andenhancing its competitiveness on the global stage. By investing inkey sectors such as energy and transport, the government seeks tolay the groundwork for a thriving non-energy sector, capable ofdriving sustainable economic growth in the years to come.

The proposed overhaul of the tax policy reflects a proactiveapproach by Azerbaijani authorities to address structuralvulnerabilities and capitalize on emerging opportunities. Bydiversifying revenue sources and fostering an environment conduciveto business growth, Azerbaijan aims to build a more resilient anddynamic economy, capable of withstanding external shocks andensuring long-term prosperity for its citizens.

As the nation embarks on this ambitious journey of economictransformation, effective implementation of these reforms will beparamount. Close collaboration between the government, privatesector, and international partners will be essential to navigatepotential challenges and unlock the full potential of Azerbaijan'seconomy.

In conclusion, Azerbaijan's decision to review its tax policycomprehensively underscores its commitment to economicdiversification and sustainable growth. With careful planning andexecution, these reforms have the potential to reshape thecountry's economic landscape, laying the foundation for a moreprosperous and resilient future.

MENAFN07042024000195011045ID1108067996