The government of Tajikistan regularly cancels the tax debts of state-owned enterprises through official decrees.  Just in the past year, these enterprises have been forgiven hundreds of millions of somonis in tax arrears—at least according to publicly accessible documents.  Meanwhile, the country’s budget urgently requires additional revenue sources.

Perhaps it’s time to place inefficient enterprises in more capable hands?

Among the "fortunate" enterprises granted debt forgiveness at various times are: JSC "Barqi Tojik" (repeatedly); JSC "Tajiktransgaz"; JSC "Roghun Hydropower Plant"; JSC "Tajik Air"; JSC "Tajiktelecom" and the State Unitary Enterprise "Center for Electromagnetic Compatibility and Radio Monitoring" (both under the Communications Service); JSC "Sughdiyon," owned by the Agency for State Material Reserves; SUE "Tajik Coal"; SUE "Housing and Utilities"; JSC "Southern Parmakuni" and others.

In March last year, the government adopted a "Procedure for Recognizing and Writing Off Hopeless Tax Debts," which effectively gave it unlimited power to forgive the debts of any taxpayer unilaterally, without consultation with parliamentary deputies (the people’s representatives).

Independent experts deem the tax debt forgiveness practice for state-owned enterprises unacceptable and unjust, calling it a form of "cross-subsidization," where one party is forgiven large mandatory payments, while others are penalized for even minor delays.

And yet these tax write-offs don’t seem to help...

Tax debt forgiveness for state enterprises has been widespread since 2019, when the government ordered relevant ministries and agencies to take effective measures to reduce the debts of major state-owned enterprises. According to official statistics, Tajikistan has more than 1,000 enterprises with state participation, of which 600 are majority-owned by the government.

The total debt of 27 large state-owned enterprises monitored by the Ministry of Finance was 60.8 billion somonis (over US$5.5 billion) at the beginning of 2024, equal to 46.5% of last year’s GDP.

The largest debtors among these enterprises include: JSC "Barqi Tojik"—over 60% of the total debt; JSC "Roghun Hydropower Plant"—over 15%; JSC "Tajik Aluminum Company," SUE "Tajik Railways," and JSC "Tajiktransgaz"—with a combined debt of 2.3 billion somonis (around US$210 million) at the end of 2023.

The tax debts of these enterprises have repeatedly been written off through various schemes over the past five years, following the above decree. However, this has not improved the financial and economic status of these enterprises as the government had hoped. For example, the debt of the largest debtor, "Barqi Tojik," increased by 14.5 billion somonis—from 22.9 billion somonis at the start of 2019 to 37.4 billion somonis by early 2024.

What should be done?

Local and international experts have suggested since the early 2000s that Tajikistan should restructure and privatize its major inefficient state-owned enterprises to reduce the burden on the budget, decrease economic monopolization, and enhance open competition, ultimately aiding the country’s development.

Privatization began with small enterprises in the 1990s and continued with the sale of state shares in medium-sized enterprises.  By 2023, more than 13,000 small and medium-sized state enterprises, primarily in agriculture, trade, and services, had been privatized in Tajikistan, according to official data.

However, large enterprises in sectors like transportation, energy, water management, and manufacturing remain state-owned.

According to the World Bank, most assets are concentrated in 27 major state-owned enterprises, with the top 10 holding 97% of total assets. These enterprises are mainly in critical sectors such as mining, chemicals, finance, energy, telecommunications, and transportation.