AZE.US
Economist Natig Jafarli has said that bringing Azerbaijan’s economy out of the shadows requires not only lower taxes, but also less regulatory pressure on businesses.
Speaking on the YouTube channel “Novosti Kavkaza,” Jafarli said the shadow economy exists in all countries, including developed ones. But in Azerbaijan, especially in the regions, cafes, restaurants and small businesses, cash turnover still plays a significant role.
According to him, Azerbaijan has seen visible changes in recent years. More people now pay by bank card or mobile phone, while the VAT cashback mechanism has created an additional incentive for cashless payments.
Jafarli said this has helped bring part of the economy into the legal turnover. However, the problem has not been fully resolved because small businesses still face serious costs related to cashless payment infrastructure.
He noted that for small shops and cafes, especially in the regions of Azerbaijan, buying cash registers, payment terminals and connecting to modern payment systems can be a heavy burden.
“For a person who owns a small shop in the region, $2,000 is a big burden,” Jafarli said.
The economist also pointed to card payment commissions. According to him, they previously reached up to 2.5%, later falling to around 1.7-1.8%. There are now discussions about reducing them further to 1.5% and then to 1%.
Jafarli said that if the state wants to expand cashless payments, it should help small businesses reduce these costs. Otherwise, entrepreneurs will continue to prefer cash in order to avoid additional expenses.
He also said there is a psychological factor. In the regions, especially among older people, many are used to holding money in their hands, counting banknotes and not fully trusting numbers on a bank account or phone screen.
But Jafarli said the main problem for business in Azerbaijan is not only taxes. It is also the large number of regulatory requirements.
According to him, entrepreneurs face inspections, fines, permits, certificates and laboratory tests. Even when these payments are official and not connected to corruption, they still create an additional burden for business.
As an example, he pointed to importers who bring goods from Turkey or European countries. According to Jafarli, even when these products already have foreign certificates, entrepreneurs in Azerbaijan may still be required to pass additional laboratory checks and pay for new documents.
He said that in some cases, businesses must pay 1,000-1,500 manats for such procedures each time. These costs, he added, inevitably affect prices.
“In the end, it is not business that pays. We, the consumers, pay,” Jafarli said.
He explained that when an entrepreneur spends more on certificates, fees, inspections or fines, those costs are included in the final price of the product. As a result, an item that cost 9 manats yesterday may cost 10 manats tomorrow.
Jafarli said Azerbaijan needs to reduce not only the tax burden, but also the number of regulatory acts that complicate business activity.
According to him, excessive regulation is not always about corruption. Even formal and legal requirements can put pressure on entrepreneurs, increase costs and slow economic activity.
The economist said Azerbaijan has a financial safety cushion through the State Oil Fund and Central Bank reserves. In his view, reducing the burden on business may temporarily reduce budget revenues at the first stage, but later stimulate economic activity and expand the tax base.
Jafarli said the state should create conditions in which it is more profitable for entrepreneurs to work openly, pay taxes and develop their businesses instead of moving into the shadow economy.
In his view, this requires lower costs, clearer rules, less bureaucracy and more accessible cashless payment infrastructure.
The economist said such an approach could help Azerbaijan gradually reduce the shadow economy, support small businesses and ease pressure on consumers.
AZE.US