By AZE.US
Azerbaijan’s decision to abolish criminal penalties for failing to repatriate foreign currency earnings is a positive but insufficient step, economist Natig Jafarli said, arguing that the government should attract money through investment incentives and tourism rather than coercion.
Article 208 of Azerbaijan’s Criminal Code, which covers the failure to return foreign currency earned through foreign economic activity, will be repealed on Jan. 1, 2027, according to the current text of the Criminal Code.
The existing provision allows for up to three years of restricted liberty or imprisonment for failing to return a significant amount of foreign currency. More serious cases can carry prison terms of three to five years.
“It is good that people will no longer be imprisoned, but fines remain, and the logic of forcibly returning the money still raises questions,” Jafarli said.
Under the revised administrative rules, officials may be fined between 10% and 20% of the unreturned amount, while legal entities may face penalties ranging from 20% to 30%. Those who return the funds before a court or another authorized body issues a decision may be exempted from administrative liability.
Jafarli said the previous requirements placed the heaviest burden on small and medium-sized businesses, particularly agricultural exporters. Major companies, meanwhile, regularly use earnings generated abroad to finance investments in countries such as Turkey, Georgia and Romania.
He offered the example of an Azerbaijani farmer who exports $500,000 worth of produce. After paying all applicable taxes, Jafarli argued, the business owner should be able to decide whether to bring the money to Azerbaijan, purchase property abroad or invest in another country.
“If the money belongs to the entrepreneur, why must it first be returned to Azerbaijan?” he said.
Jafarli acknowledged that bringing foreign currency into Azerbaijan and directing it into the domestic economy would benefit the country. However, he said the government should achieve that goal through incentives rather than threats, fines or imprisonment.
One option, he suggested, would be to offer preferential financing based on the amount an entrepreneur brings back and invests in Azerbaijan.
“If a business owner brings money into the country to build a factory, open a restaurant or develop a hotel, the state could offer an interest-free or low-interest loan,” Jafarli said.
He also criticized the practical difficulties businesses face when they return money to Azerbaijan and later need to transfer it abroad. Banks may impose monthly limits, charge fees or request invoices and other supporting documents for international payments.
According to Jafarli, investment and tourism are the most natural sources of foreign currency inflows. Improving the business climate and reopening Azerbaijan’s land borders would therefore be more effective than forcing exporters to repatriate their earnings.
“If we want foreign currency to enter the country, the simplest way is to open the borders,” he said. “Tourists will come from Europe, Arab countries and neighboring states, and they will bring money.”
Jafarli said countries are now competing for every dollar of investment, making it essential to treat investors as valued partners and provide predictable conditions for doing business.
He argued that a stronger investment climate, fewer financial restrictions and the restoration of cross-border travel would produce more sustainable foreign currency inflows. Continued pressure on private capital, he warned, could instead encourage Azerbaijani investors to move their money to Georgia, Kazakhstan, Uzbekistan, Turkey, Europe or the United States.
AZE.US