Kazakhstan's payroll tax chaos pushes workers into the shadows
Kazakhstan’s payroll tax system is under scrutiny as experts call for a major reform. The current structure, described as outdated and overly complex, has pushed millions of workers outside the formal economy. Rising tax burdens and a patchwork of regulations are now raising concerns about future economic stability. In the mid-1990s, Kazakhstan operated a progressive income tax system, with rates ranging from 5% to 40%. A 30% social tax was also in place at the time. By 2007, reforms simplified the system, introducing a flat 10% personal income tax and reducing the total burden to between 28% and 36%.
The trend of lowering taxes reversed after 2008. New levies were added in 2017, 2020, and again in 2024, complicating the system further. Today, the payroll tax structure resembles an old house with extensions built every decade—clumsy and inefficient. The current system includes seven separate payments, each with its own taxable base and thresholds. This complexity has driven the total tax burden on wages close to 40%. Estimates suggest it will reach 41% by 2028 if no changes are made. Even now, the effective burden for 2026 is projected at around 29-30% of the payroll. As a result, many Kazakhs opt to stay outside the formal economy, finding the costs and bureaucracy too high to justify compliance.
Without reform, Kazakhstan’s tax system will continue to push workers into informal employment. The projected 41% burden by 2028 highlights the urgency of restructuring payroll taxes. A simpler, more efficient system could help bring millions back into the formal workforce.
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