Revenue Withdrawals, Elected Akims and Local Tax Accountability

Main conclusions

• Kazakhstan’s reforms gave rural districts their own (fourth-tier) budgets and assigned revenues between 2018 and 2020, and directly elected akims from 2021. Local accountability was meant to come with local resources.
• An under-regulated mechanism of withdrawals to district budgets is breaking this link. A large share of fiscally strong rural districts’ own revenues is transferred upward, and over-fulfilling the revenue plan leads to a higher target the next year.
• In the most telling case, a rural district kept only about one-fifth of the own revenues it collected.
• The return on extra revenue effort is close to zero, so the incentive to broaden the local tax base disappears. Elected akims cannot show residents a link between the taxes they pay and the local services they receive, and they are blamed for decisions made at the district level.
• Fiscal equalisation is still needed, but its rules should change for villages, rural districts, settlements and towns of district significance. The note recommends a statutory cap on withdrawals, a stable three-year revenue baseline, letting communities keep growth above that baseline, a protected local minimum, and a public, explainable formula.