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ISSN : 1598-7248 (Print)
ISSN : 2234-6473 (Online)
Industrial Engineering & Management Systems Vol.19 No.1 pp.289-300
DOI : https://doi.org/10.7232/iems.2020.19.1.289

Tax Audit and Doing Business in Kazakhstan: Cognitive Map and Scenario-Based Analysis

Serik Dosmurzaevich Baimedetov, Sara Abdrashidovna Issakova*, Almarа Yerkinovna Nauryzbekova, Altynay Ryskulbekovna Tanatova, Saule Baiyanovna Naurizkulova, Meiramkul Zhasaganbergenovna Esenova, Kuanysh Daripbaevich Turganbayev
Head of the Union Bureau of the Department of the Economic and Business, Taraz State University named after Muhammad Khaydar Dulati, Taraz, Republic of Kazakhstan
Doctor of Sciences (Economics), Head of the Chair of the Audit and Accounting, Taraz State University named after Muhammad Khaydar Dulati, Taraz, Republic of Kazakhstan
Candidate of Sciences (Economics), Deputy Provost on Educational Work and Public Affairs, Taraz State University named after Muhammad Khaydar Dulati, Taraz, Republic of Kazakhstan
Candidate of Sciences (Economics), Associate Professor, Chair of Finances, Department of Economics and Business, Taraz State University named after Muhammad Khaydar Dulati, Taraz, Republic of Kazakhstan
Senior Lecturer, Master, Chair of Finances, Department of Economics and Business, Taraz State University named after Muhammad Khaydar Dulati, Taraz, Republic of Kazakhstan
Senior Lecturer, Master, Chair of the Audit and Accounting, Department of Economics and Business, Taraz State University named after Muhammad Khaydar Dulati, Taraz, Republic of Kazakhstan
*Corresponding Author, E-mail: saraissakova@yandex.ru
November 14, 2019 November 29, 2019 December 30, 2019

ABSTRACT


The article purpose is to develop the approach to determine the optimal interaction scenario between conditions for doing business and specifics of maintaining the tax audit in the Republic of Kazakhstan. The leading research methods have become the method of expert assessments, the cognitive method, and the method of impulsive modeling. With the help of 50 experts, factors of ease of doing business and conditions in Kazakhstan were identified, and a cognitive model of their interaction with the terms of the tax audit was developed. Based on the technology of impulsive modeling, a useful scenario for harmonizing compliance with tax audit rules and business profitability is determined. It was concluded that the most effective scenario for ensuring a high-quality tax audit and ease of doing business in Kazakhstan in current conditions is a reduction in the tax burden (income tax rates up to 15%) with a constant level of tax audits and fines for violations. The application of the proposed scenario will increase the ease of doing business in Kazakhstan, which will help reduce the number of tax offenses, as well as create favorable conditions for attracting FDI to the country. The research originality/value lies in the fact that the developed scenarios are based on consideration of the most significant factors that make it possible to objectively assess the nature of the balance between the conditions for doing business and specifics of maintaining the tax audit in the Republic of Kazakhstan, to see its new sides.



초록


    1. INTRODUCTION

    Countries with developing market economies as well as transition economies increasingly are interested in FDI as a critical factor of economic development and modernization, income growth and employment. These countries liberalized the regime for receiving FDI, and also implemented other measures in order to attract investment. They have tackled the problem of finding optimal options for implementing their domestic policies in order to maximize benefits from the presence and using foreign capital in the national economy. In Kazakhstan inadequate resource to finance long-term investment is a major problem (Gelatt and Pomp, 1984;Vogiatzoglou, 2016). This lack of investible funds is a big setback to economic growth and this is making it increasingly difficult to achieve increasing of competitiveness and join the TOP 30 of the most developed countries of the world. Foreign direct investment is seen as a major source of getting the required funds for investments hence Kazakhstan offer incentives to encourage. Apart from making investible funds available, FDI inflow to developing countries s assumed to produce externalities through technology transfer and spill-over effect (Corcoran and Gillanders, 2013), which have a last longing effect on the economy (Tian, 2018).

    The only aspect of the business regulation that stands out as a robust determinant is the ease of trading across borders (Jovanovic and Jovanovic, 2018;Boubaker et al., 2018;Hilkevics and Semakina, 2019).

    Strategically, politically and economically, Eurasia has become the place in which to do business. At the heart of this economic transformation sits Ka-zakhstan, which has performed far better than the re-gional average in Eastern Europe and Central Asia on the ease of doing business. The political stability, cou-pled with a strong vision in the formulation and execu-tion of the country’s economic development, has posi-tioned Kazakhstan as the regional leader in Central Asia (TMF Group, 2019). Many experts believe that the in-creasing foreign direct investment with technology and the accelerated development of foreign trade will speed up the economic transition in the country (Tugut and Lee, 2019;Sarsembayev et al., 2019). The need to en-gage with foreign companies means that Kazakhstan presents an open market, but heavy bureaucracy and corruption applicable at operational level mean that in practice, doing business can be somewhat challenging. Also, acquiring good market intelligence and gaining contacts is not as straightforward as it may be in many other areas of the world (Barry, 2019;Haufler et al., 2018). There can often be a suspicion of initial business approaches and tracking down the right people who are prepared to openly engage at an early stage can be very difficult, and experienced business partners can be difficult to find. Then the only aspect of the achieve attraction for FDI and is to ease doing business in Kazakhstan and provide the ease of trading across borders (Jovanovic and Jovanovic, 2018;Pogorletskiy et al., 2016).

    This, in turn, entails the necessary condition to implement OECD economic standards and practices in the strategy and tactics of conducting the trade policy, which necessitates the transformation of reporting and forms of its management. Results of maintaining the tax audit have a multi-level influence on both the country business environment and conditions for doing business by economic entities (Tarasova et al., 2018;Taraschenko, 2013;Proskura, 2013;Muktiyanto et al., 2019). Structuring areas and problems of the imbalance in tax management and conditions for doing business in the Republic of Kazakhstan is one of priority fields and development programs of the Republic of Kazakhstan (Akorda, 2012). According to the Ease of doing business index of “Doing Business” in 2019, compared to 2018, Kazakhstan has strengthened its position by 8 points - from the 36th to the 28th place. At the same time, according to the “Taxation” indicator, it has decreased by 6 positions - from the 20th to the 56th place in the ranking of 190 countries of the world (Doing Business, 2018;Doing Business, 2019). In Kazakhstan in December 2017 by amending the law “About transfer pricing” (Nazarbayev, 2008). This tool was recommended by the OECD as part of its tax erosion prevention and tax evasion program aimed at reforming the international taxation (Base Erosion and Profit Shifting - BEPS). The purpose of this reporting is to make sure that taxes are paid by international companies in countries the activity in which is profitable in proportion to benefits obtained (Haufler et al., 2018). The experience has shown that on the basis of transfer prices, 30-50% of goods and services are exported, and this practice has proven to be effective (Gerasimenko, 2013). But the implementation of standards and the adaptation of OECD practices in Kazakhstan, along with the growing trend of the foreign economic activity, cause disproportions in the balance between reporting by international groups of enterprises and results of the tax audit (Akorda, 2012). Since according to changes in the Law, international groups operating in Kazakhstan are required to prepare and submit the “three-level” documentation within 12 months, consisting of the following types of reporting: inter-country; main; local; the application to participate in international groups. The requirements are quite complex and are not tested in practice under conditions for doing the business in Kazakhstan, as companies will have to once again make efforts to function at their full capacity and at the same time to prepare to meet the new requirement. This is due to the fact that the adaptation of business processes, setting up accounting systems and personnel training will take time. Therefore, reducing the tax bur-den through the use of transfer pricing was one of key problems for Kazakhstan prior to introducing principles and attempting to implement OECD programs (Reznik, 2019). In this regard, the scientific develop¬ment of approaches to assess key parameters to achieve the balance between creating conditions for doing business, as well as creating rational paperwork, by reducing the time frame, bureaucratizing reporting structures and maintaining a qualitative tax audit, is made actual (Barmuta et al., 2019). The priority task of this study is to develop the approach to determine the optimal interaction scenario between conditions for doing business and specifics of maintaining the tax audit in the Republic of Kazakhstan. The rest of this study is organized as follows: Section two and three contains justifications of the methodological apparatus and the statistical base of the study to justify the scenarios of interaction between the conditions of doing business and the features of conducting a tax audit in the Republic of Kazakhstan. The Results and Discussion section provides a formalization of the interdependen-cies of the main parameters for conducting a tax audit and the conditions for doing business in Kazakhstan. The optimal values of changes in the target factors of doing business and tax violations under the influence of the transformation of the tax base are determined and justified.

    2. MATERIALS AND METHOD

    The first stage of the study was the development of the cognitive model (a weighted directed graph) of the tax audit in the context of its influence on conditions for doing business in the country and reporting on its performance. Assessing changes in conditions for doing business and the specifics of maintaining the tax audit using the cognitive approach and the cognitive model (Calori et al., 1994;Brännback and Malaska, 1995; Jastrzębska and Cisłak, 2019; Zhang et al., 2018) required defining its main elements: basic, controlling factors, causal relationships between them. Basic factors are factors that determine processes and phenomena that are observed in the semi-structured system and its environment.

    Control factors are indicators employing which it is possible to regulate the conditions of doing business and tax audit (Bougon, 1992;Carsrud et al., 2009;Yakhneeva et al., 2020;Sasongko et al., 2019).

    The next step in constructing a cognitive model is to determine the presence of relationships between model factors. For this, we used paired correlation coefficients coefficients calculated between the primary factors, control factors, and primary factors (Brännback and Carsrud, 2009;Tegarden and Sheetz, 2003), the values of which are given in Table 1-2. Interpretation of the strength of the connection between the factors is carried out on the Chaddock scale; the direction of influence of one factor on another is determined based on the practical experience of the expert group, the composition of which is described above.

    The situation analysis using the cognitive map was considered from the point of view of problems of the statistical and dynamic analysis. According to tasks of the statistical analysis, the situation was investigated accordingly with the study of the structure of the mutual influence of factors of the cognitive model. Based on tasks of the dynamic analysis, the specifics of doing business and maintaining the tax audit are studied, and possible scenarios for developing the situation over time are generated.

    Based on the cognitive model, the scenario simulation of developing the situation of maintaining the tax audit and its influence on reporting and the activity of enterprises was developed (Defining limits of possible changes of factors and creating scenarios for developing the situation). The development scenarios were generated by assessing the influence of impulses on each factor, which is represented by the following interdependence (1) (Johansen, 2018):

    x i ( t + 1 ) = x i ( t ) + j I i a i j ( x j ( t ) x j ( t 1 ) ) , i = 1 , , N
    (1)

    where хi(t), хi(n+1) is the value of the i-th factor at the time t + 1 and t, respectively;

    • xj(t)-xj(t-1) = Δxj(t) is the increment of the factor xj at the time t; xjt;

    • aij is the influence of the factor xj on the factor хi ;

    • Ii is the number of factors influencing the factor хi.

    An impulse is considered as a force leading to a change in the state of the system - the values of the primary factors (Bougon, 1992;Tegarden and Sheetz, 2003). Depending on the development scenario, the value of the impulse corresponds to the average for the studied period or to the reduced growth rate of control factors. Scenarios of tax policy transformation in the Republic of Kazakhstan are described in more detail in the Data section.

    In order to assess the effectiveness of the pro-posed scenarios of tax policy transformation according to formula (1), the changes in the resulting base indicator, following the cognitive model, are calculated хi (n+1). The priority of the implementation of the tax policy transformation scenario is determined by the criterion of maximizing the positive change in indicators and minimizing the negative.

    3. DATA

    Implementation of cognitive and scenario modeling to determine the relationships between factors characterizing the conditions of doing business and the features of conducting a tax audit, as well as constructing scenarios for the transformation of tax policy in the Republic of Kazakhstan, provides for the availability of quantitative indicators that correspond to primary and control factors. In order to determine the list of primary and controlling factors, the opinion of experts was used, which were 50 people are representatives of the Department of Tax Methodology, Department of Customs Methodology, Department of Control, Department of Audit, Department of Operational Control of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan. The competence of experts in the studied subjects, corresponding to their education and work profile, testifies to the representativeness of the identified factors of doing business and conducting a tax audit in Kazakhstan.

    In this study, the basic factors are indicators that allow us to quantify problems of doing business and the tax management in the Republic of Kazakhstan. Based on the analysis of private indicators of Doing Business index, as well as the analysis of scientific literature, it is determined that such basic factors are the following indicators: business profits (O1), the number of tax offences (O2), the amount of tax revenues (O3), reporting time (O4), the number of payments per year (O5), the time for VAT recovery (O6), the cost of processing export documents (O7), the cost of export: border and customs control (O8), the external trade turnover (O9), export prices (O10 ).

    Based on the analysis of problems of the specifics of doing business and maintaining the tax audit, the following tax regulation tools of the Republic of Kazakhstan are referred to governing factors: the income tax rate (U1), the payroll tax rate (U2), the tax burden (U3), the number of tax inspections (U4) ), the amount of fines, penalties, etc. (U5).

    The expert group confirms the representativeness of the primary and controlling factors. For each factor (O1-O10) and (U1-U5), experts were asked to rate the following:

    • 1) does this factor provide an opportunity to quantify the problems of doing business and the specifics of conducting a tax audit in the Republic of Kazakhstan (for primary factors); whether this factor is an indicator of tax policy, which affects the conditions for doing business and the features of conducting a tax audit in the Republic of Ka-zakhstan (for managing factors). This question provided the answer options “Yes”/”No”;

    • 2) whether the proposed list of factors is sufficient to assess the problems of doing business and the specifics of conducting a tax audit in the Republic of Kazakhstan. In the process of answering this question, experts rated from “0” to “10” points. The higher the score set by the expert, the more sufficient is the sample.

    All experts answered positively to the 1st ques-tion. The percentage of sample sufficiency is calculated as the arithmetic average of the expert group for the ratio of the set score (from 0 to 10) to the maximum possible (10 points). The coefficient of the sufficiency of the indicators sample thus calculated was 84%. If we draw a parallel with multidimensional factor analysis, then in it, as in this variation of expert assessment, the optimal number of indicators (factors) is selected from the set of indicators describing the system under study. The quality criterion for factor analysis is% factorization - an indicator of how many percents the formed system of indicators describes the system under study - an adequacy indicator. In factor analysis, a sufficient level of factorization indicator is 80% (Menke, 2018). Based on this, the % of the sufficiency of the sample of indicators 84% in this expert assessment can be considered sufficient to build a cognitive model. The consistency of expert opinions is evidenced by the value of the coefficient of variation calculated from the estimates of the sufficiency of the sample set by experts. The coefficient of variation is 8%.

    To create the cognitive model and implement the scenario simulation we have used values of basic and controlling data for the Republic of Kazakhstan for the period of 2014-2018 (Ministry of National Economy of the Republic of Kazakhstan, 2020;The World Bank Group, 2019;State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan, 2020;Commitee on the Legal Statistics and Special Accounts of the State Office of Public Prosecutor of Republic of Kazakhstan, 2019).

    Using the correlation analysis method, the level of relationship between factors of the cognitive model of the specifics of doing business and maintaining the tax audit in Kazakhstan is assessed in the study. The numerical expression of the level of the relationship is in the interval [-1, +1], where: 0 is the absence of the relationship between factors; | 0,1 | - | 0,2 | is a very low level of the relationship; | 0,3 | - | 0,4 | is a low level of the relationship; |0,5 | - | 0,6 | is a moderate level of the relationship; | 0,7 | - | 0,8 | is a high level of the relationship; | 0,9 | - | 1,0 | is a very high level of the relationship. The +/- sign indicates the nature of the influence –a direct or reverse one.

    The statistical basis to calculate the correlation coefficients was the values of these indicators U1-U5, O1-O10 for the period 2014-2018, which are official statistical information. The possibility of these data for calculating the correlation coefficients has been con-firmed by their stationarity.

    The calculation of paired linear correlation coefficients between the factors characterizing the ease of doing business and the state of the tax audit in the Republic of Kazakhstan seems possible as a result of the fact that there is a linear relationship between these factors for the study period.

    As a result of a collective online discussion, the expert group determined the direction of influence be-tween the factors (direction of the oriented graph of the cognitive map) (Figure 1). As the discussion lasted until consensus was reached, the results obtained are characterized by the consistency of expert opinions.

    According to the built cognitive model, the re-sulting factor is O1 – business profits and O2 – tax of-fences. The change in the resulting indicator as a result of implementing scenarios is calculated as the sum of the influence of impulses along the impulse action chain with the correction for the correlation coefficient between factors of the cognitive model. The total change in the resulting indicator is calculated as the sum of changes of factors U1-U5.

    Changes of the specifics of doing business and maintaining the tax audit in the context of the transfor-mation of Kazakhstan’s tax policy were assessed according to the following scenarios:

    • 1) the forecast of changes of the specifics of doing business for the whole of Kazakhstan, without changes in the external influence on the situation. When implementing this scenario, the impulse change is calculated as the average growth rate of the corresponding indicator for the period of 2014-2018;

    • 2) the forecast of changes in the situation with the tax burden decrease (by ½ of the average value of negative influencing factors). In this scenario, impulse changes are calculated as ½ of values of average growth rates of tax burden indicators (factors U1-U3) and average growth rates of other other indicators (U4-U5);

    • 3) the synthesis of actions aimed at decreasing the tax burden and reducing the administrative influence of tax authorities. Impulse changes are calculated as ½ of values of average growth rates of indicators U1-U5 for the period of 2014-2018.

    4. RESULTS

    The factors, described in the Data section are structured, and the influence of the specifics of maintaining the tax audit on the specifics of doing business is determined in the form of the cognitive map, which is transformed into the cognitive model. The cognitive model (Figure 1) is created on the basis of basic (O), controlling (U) factors and causal relationships between them.

    Basic factors reflect indicators characterizing the ease of doing business and the state of the tax audit in the Republic of Kazakhstan. The resulting indicator of the ease of doing business and an indicator of the impact of the quality of the tax audit on the conditions of doing business and the possibility of making a profit is factor O1 - the profit of enterprises. The size of profit is influenced by tax policy factors characterizing the internal conditions of enterprises (factors O2-O6), and factors affecting the export potential of enterprises (O7-O10). The basic factors presented in the cognitive map describe the domestic and export potential of the business sector of the Republic of Kazakhstan, thereby providing a comprehensive assessment of the business environment. The governing factors of the cognitive model are tax audit quality indicators: tax rates (U1-U3), the number of tax audits (U4) and the amount of fines for violation of tax laws (U5). These are factors that affect the efficiency of enterprises in the domestic and foreign markets.

    The direction of the graph edge (arrow) indicates the direction of the factor influence, which is determined as a result of studying patterns of the influence of tax tools on the social and economic situation in the country and is supported by the opinions of the experts. The values of the edges of the directed graph correspond to the values of pair correlation coefficients between the factors of the model; the sign at the base of the edges of the graph (+/-) - the nature of the relationship (direct or inverse) between the factors based on their values of the correlation coeffi-cients.

    According to Figure 1, using the cognitive map, the structural characteristics of the influence of key aspects of maintaining the tax audit on conditions for doing business in the country is studied.

    According to the constructed cognitive map, at the top of the oriented graph are factors such as enterprise profit (O1) and tax offenses (O2). The effectiveness of these factors is determined by constructing the hierarchy levels of the primary factors using the graph method. The top-level of the hierarchy was formed by factors of enterprise profit and tax violations. These are the resulting indicators that characterize the ease of doing business and the quality of the tax audit, respectively, by reflecting the influence of managers and other primary factors.

    Taxation of profits and wages, tax burden, tax audits, and fines affect the profits of enterprises and the number of tax offenses. From the primary factors, the influence of tax revenues, the time for submitting reports, the number of payments, the cost of processing export documents, and the cost of export are determined: border and customs control, foreign trade, export prices. The strength and nature of the relationships between these and other factors of the model, corresponding to the value of the edges of the graph (Figure 1), are estimated using pair correlation coefficients. The calculation results are presented in Tables 1-2. Of the tax policy instruments, the profit tax rate (correlation coefficient -0.409), the payroll tax rate (correlation coefficient -0.213), and the tax burden (correlation coefficient -0.409) harm the profit margins of enterprises. An increase in the rate of these taxes leads to an increase in deductions from gross profit and, accordingly, to a decrease in net profit. Another adverse effect on the ease of doing business and the state of the tax audit in the country from an increase in tax rates is manifested in an increase in the level of economic shadowing, which is confirmed by the Laffer curve. The increase in rates leads to an increase in tax violations (factor O2) and a decrease in the declared profit of enterprises (factor O1).

    Tax audits (correlation coefficient 0.282) and fines (correlation coefficient 0.456) have a positive effect on the profit margin of enterprises. An increase in factors U4, U5 leads to a decrease in tax offenses (factor O2), which is confirmed by correlation coefficients of -0.114 and -0.399, respectively. Reducing tax violations by increasing the number of tax audits and fines increases the size of the declared profits of enterprises (factor O1).

    The most significant impact on the profit margin of enterprises and the number of tax offenses is exerted by the income tax rate, tax burden, and the number of fines. The strength of the connection between these primary factors and the managers is approaching the average level. The model does not contain factors that are highly correlated with the size of enterprises’ profits and tax violations, because non-tax factors have a dominant influence on these factors: the effectiveness of the financial and economic activities of enterprises (for the profit of enterprises), socio-demographic and criminogenic (for the number of tax offenses). The purpose of the article is to increase the ease of doing business and improve the conditions for conducting tax audits through tax policy tools.

    According to the analysis results presented in Tables 1-2, the nature of the influence is determined and the level of the relationship between factors of the cognitive model of the specifics of doing business and maintaining the tax audit is assessed. This allowed us to develop scenarios of changing the specifics of doing business and maintaining the tax audit (by changing the resulting factors - the profits of enterprises and tax violations) in the context of the transformation of Kazakhstan’s tax policy (Table 3). At the end of 2018, the income tax rate is 16.2%, the salary rate is 11.3%, the total tax rate is 29.2%, the number of tax audits per year is 39,117 units, the amount of fines paid for violation of tax legislation is 11,023,105 thousand tenge. According to the dynamics for 2014-2018. the average growth rate of these indicators is -0.15% for factor U1, + 0.22% for factor U2, + 0.26% for factor U3, + 12.1% for factor U4, + 26.83% for factor U5. These changes correspond to the conditions for the implementation of the 1st scenario for the development of tax audits, in which, as it is assumed, existing trends in tax policy factors are preserved.

    The 2nd scenario assumes a 2-fold decrease in the indicators of the dynamics of factors (U1-U3) characterizing the level of the tax burden, while the dynamics of factors U4-U5 remains constant. According to this scenario, the change in the income tax rate will be -0.075%, the payroll tax rate + 0.11%, the total tax rate + 0.13%, the number of tax audits + 12.1%, the amount of fines paid + 26.83%.

    The 3rd scenario provides for a 2-fold decrease in the dynamics of all control factors. Thus, considering this, the growth rate of indicators is: -0.075% (U1), +0.11% (U2), +0.13% (U3), +6.05% (U4), +13.415% (U5).

    The results of the implementation of these sce-narios for changing business conditions during a tax audit in the Republic of Kazakhstan are shown in Table 3.

    Table 3 presents a fragment that demonstrates the influence of governing factors on the profit margin of enterprises and the change in the profit margin of enterprises depending on the scenarios of the transformation of the tax policy of Kazakhstan. Similar calculations were performed to assess changes in the number of tax offenses in the implementation of these scenarios.

    The change in the resulting indicators is calcu-lated according to the complete impulse chain, including the maximum number of factors. This made it possible to consider the complex influence of factors of ease of doing business and the state of tax audit on the profit of enterprises and the number of offenses. The deviation of the calculated change in the resulting indicator within the framework of one scenario for different pulse chains does not exceed 5%. Therefore, with a probability of 95%, we can state the adequacy of the results of pulse modeling.

    The sensitivity of changes in the profit of enter-prises (factor O1) and the number of tax offenses (factor O2) in implementing tax audit transformation scenarios is shown in Figure 2a - 2b.

    The scenario simulation results of the specifics of doing business and maintaining the tax audit in the country (Table 3) show that reducing the tax burden with the permanent tax regulation, by applying fines and tax inspections (scenario 2), will increase business profits by 0.000072% (in monetary terms, it is 73,699 million tenge), which is 1,41% more than in the basic scenario of developing the situation.

    Increasing profits as the resulting indicator of the ease of doing business in Kazakhstan and reducing tax offenses, as a result of the qualitative tax audit, according to three generated scenarios (Table 3, Figure 2a - 2b) and the identified ranking priority primarily depend on the size of fines, penalties and etc. Reducing the size and number of fines provokes the increase of tax offences and destructively affects the reflection of business profits, which, in turn, is reflected at the time of reporting when maintaining the tax audit. The second priority factor having a negative influence on achieving the balance between conditions and the ease of doing business in Kazakhstan, and accordingly, providing correct reporting is reducing the number of tax inspections. At the same time, the tax inspection is the last one in priority in reducing the number of tax offenses.

    5. DISCUSSION

    The absence of a fundamental methodological base, criteria and indicators is the basis to have the fol-lowing problem – the tax evasion, with the asymmetry of the tax audit and reporting. There are three main reasons for the tax evasion from the perspective of the business community: “VAT”, “Arrears and penalties”, “Articles of the Tax Code” (Nazarbayev, 2017). Amendments to the legislation of Kazakhstan in 2019 regarding administrative and criminal liability for offenses related to understating taxes, including raising thresholds for the criminal liability for tax evasion, as well as increasing administrative penalties for understating taxes (Nazarbayev, 2017) represent the presence and increase of cases of the non-payment of taxes on one part, and are a potential reason for tax evasion, in the category “Arrears and penalties” and “Articles of the Tax Code”. Since, tax evasion, as well as other responsibilities, expressed in increasing the liability threshold “on a large scale” from 20,000 to 50,000 monthly calculation indices (126.25 million tenge or 330 thousand US dollars), in “particularly large amounts” from 50,000 to 75,000 monthly calculation indices, as well as the increase of fines for understating taxes. Thus, the size of administrative fines in relation to: small businesses or non-profit organizations has increased from 15% to 20%; medium-sized businesses - from 30% to 50%; large businesses - from 50% to 80% of the ac-crued amount of taxes and other mandatory payments into the budget (Nazarbayev, 2017). Due to the active trading position of the Republic of Kazakhstan in the world market, the next problem of conditions for doing business and maintaining the tax audit is the use of a tax heaven or “offshore zones” to minimize the tax burden while exporting and importing products. The use of the tax heaven causes a destructive influence on the company’s reputation while maintaining the tax audit, since based on the Order of the Minister of Finance of the Republic of Kazakhstan dated February 10, 2010 No. 52, the list of offshore zones was created for purposes of the Law of the Republic of Kazakhstan “About counteracting the legalization (laundering) of illegally-obtained income and financing terrorism” (Brama Group, 2020). As well the problem is the detection of tax violations based on the tax audit results. According to the Criminal Code of the Republic of Kazakhstan (Nazarbayev, 2014), main tax violations include: the citizen evasion of the tax payment and (or) other mandatory payments into the budget (Art. 244), the tax evasion and (or) other mandatory payments of organizations into the budget (Art. 245), illegal actions in relation to the property limited in disposal on account of the taxpayer's tax debt (Art. 246). Trends of the analyzed period show the decrease in the total number of tax offences by 9.9% in 2018 compared to 2017, with the simultaneous increase in the number of tax offences under article 245 of the Criminal Code of the Republic of Kazakhstan by 2.2% - the tax evasion and (or) other mandatory payments of organizations into the budget (Deloitte, 2018). This trend confirms the need to keep the balance between reporting, the tax audit and timely tax compliance. But at the same time, it emphasizes problems of the transformation of the tax legislation and conditions for doing business in Kazakhstan, as in 2017 in comparison with 2016, when considering and implementing the number of changes in the regulatory framework, the number of tax offences under Article 245 decreased by 37.8% (Deloitte, 2018).

    In the view of the existing problems, the presented scenario modeling approach of conditions for doing business and tax reporting are formatted, which allowed to prove that the reduction of the profits tax ensures a positive influence on profits (the increase by 0.000012%) and has a negative effect on tax violations (the decrease by 1.22%). Thus, reducing the tax burden, and in particular the profits tax (up to 15%) contributes to achieving the compromise between reporting and results of the tax audit. This in turn causes the increase of the efficiency of doing business in the Republic of Kazakhstan. Thus, at this stage, in our opinion, in order to achieve the optimal balance between maintaining the tax audit and conditions for doing business in Kazakhstan, it is also necessary to implement the following set of measures: having main methodological approaches, unified standards to maintain the tax audit, both on the part of state bodies and on the part of people providing tax audit services; reflecting all stages of the horizontal monitoring for both new and current business entities; considering the legal coverage of using the bank account to recover VAT; reducing the tax burden, namely, reducing the income tax of enterprises; the optimization and transparency of the package of documents on transfer pricing required for international groups of companies while conducting the three-level inspection; forecasting and calculating optimal values of the number of tax inspections and the size of fines based on reporting results according to new standards and regulations.

    In this article scenario modeling of the develop-ment of the situation of the tax audit and its impact on the frequency of reporting and the efficiency of enterprises has been developed using the cognitive model. The results of this study make a scientific contribution to the practical solution of one of the main problems of attracting FDI to the country by means of justifying the conditions to ensure ease of doing business and effectively introducing transfer education practices. The proposed scenarios for the coordination of the balance of business conditions and the filing of the necessary financial statements and the specifics of conducting a tax audit will become the basis for improving the regulatory standards of Kazakhstan legislation in this area. This, in turn, will ensure the movement of the whole country towards global good practice in the system of regulating the entrepreneurial activity. The practical implementation of the developed approach will help to achieve a balance between the features of the tax audit, taking into account the trans-formation of not only tax legislation, but also approaches to doing business in Kazakhstan.

    The approach presented in the framework of this study to develop scenarios of developing conditions for doing business and tax reporting is of a universal nature. As it allows determining the effective nature of the interaction of basic and controlling factors both on the short- and long-term basis; to take into account current changes in maintaining the audit and conditions for doing business in the country. In contrast to the work, focusing on determining factors of the tax audit influence on the effectiveness of conditions of the business activity of enterprises (Boubaker et al., 2018). At the same time, the presented model of the interdependence and influence does not take into account all difficulties of formalizing and assessing the specifics of transfer pricing, for example, an asymmetry of the readiness of business structures to the im-plementation and the active work of tax authorities and companies providing tax audit services.

    6. CONCLUSION

    It is discovered that in the context of the integration of the economy of Kazakhstan, main destructive factors to achieve the balance between maintaining the tax audit and conditions for doing business are the following: the absence of a unified methodological and practical approach to maintaining tax records (causes the increase in the number of tax evasion precedents); general trends of the tax evasion (contribute to toughening requirements to the reporting of entrepreneurs in general, and international groups of companies, in particular); the need for the tax burden actualizes the need to use a tax heaven, not taking into account the fact of levelling the company good reputation; the time-consuming process of the adap-tation to a new form of the tax audit and the process of obtaining tax advantages; positive trends in the number of tax offenses. It is substantiated that, under current conditions, reducing the profit taxation by two points, which will slightly affect the total tax burden, and maintaining the current level of administrative measures of the tax audit (tax inspections, fines, penalties, etc.). While implementing an effective scenario of the interaction of conditions for doing business and maintaining the tax audit at this stage, it is reasonable to do the following in Kazakhstan: to determine the optimal amount of fines, penalties, etc. for future periods, with the maximum effect on tax offences; to determine the optimal number of tax inspections for future periods; to decrease the tax burden, namely a slight decrease of the income tax.

    Figure

    IEMS-19-1-289_F1.gif

    The cognitive model of the specifics of doing business and maintaining the tax audit in Kazakhstan.

    IEMS-19-1-289_F2a.gif

    The calculation results are presented in Tables 1-2 The sensitivity of changing business profits (factor O1) during the tax audit transformation

    IEMS-19-1-289_F2b.gif

    The sensitivity of changing tax offences (factor O2) during the tax audit transformation

    Table

    The neighboring relationship between controlling and basic factors of the ease of doing business and conditions for maintaining the tax audit in Kazakhstan

    The neighboring relationship between basic factors of the ease of doing business and conditions for maintaining the tax audit in Kazakhstan

    Scenarios of changing conditions for doing business while maintaining the tax audit in the Republic of Kazakhstan (on the example of the enterprise profits)

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