Azerbaijan’s Chamber of Accounts has proposed gradually reducing transfers from the State Oil Fund (SOFAZ) to the state budget starting in 2027, along with tax debt relief measures, in its opinion on the draft 2027 state budget.
According to the Chamber of Accounts’ opinion on fiscal policy for 2027-2030, transfers from the State Oil Fund of the Republic of Azerbaijan (SOFAZ) to the state budget are to be gradually brought in line, starting in 2027, with returns earned from managing the fund’s assets. The chamber considers this important for reducing the budget’s dependence on oil revenue and strengthening fiscal sustainability. The body has previously recommended placing a direct cap on fund transfers in its earlier opinions.
The document also addresses improvements to tax debt management. Under the proposal, authorities could simplify the deferral procedure that allows taxpayers who remain economically active but face payment difficulties to pay off debt in installments, while also considering relief on financial penalties and interest.
Based on the chamber’s assessment, the accumulation of tax debt poses a fiscal risk, with roughly one-third of that debt made up of financial penalties and interest. Mechanisms that make repayment easier could help preserve taxpayers’ solvency while also boosting budget revenue.
Medium-term revenue targets disclosed for first time
The opinion discloses specific medium-term revenue policy targets for the first time. It calls for keeping the ratio of tax and customs exemptions to non-oil-and-gas gross domestic product (GDP) within a range of 7.4-8%. It also sets a target of keeping the gap between projected non-oil-and-gas revenue and actual budget execution within ±5%. The chamber says these indicators are important for assessing the outcomes of revenue policy and improving the quality of budget forecasting.
The Chamber of Accounts also considers it worthwhile to set similar quantitative targets for spending policy. The opinion notes that while the main areas of budget expenditure are defined, the absence of specific quantitative indicators and measurable outcome metrics for these areas makes it harder to assess their implementation. The chamber says that, as with revenue policy, setting measurable spending targets could strengthen oversight of the efficient use of budget funds and allow for a more objective assessment of fiscal policy outcomes.
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