KAZAKHSTAN: YOUNG, WESTERN-EDUCATED OFFICIAL

UNCLAS ASTANA 001965 SENSITIVE SIPDIS STATE FOR SCA/CEN E.O. 12958: N/A TAGS: PGOV PINR ECON EFIN KZ SUBJECT: KAZAKHSTAN: YOUNG, WESTERN-EDUCATED OFFICIAL NAMED TO HEAD TAX COMMITTEE ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (U) Daulet Yergozhin was named chairman of the Ministry of Finance's Tax Committee on October 1. The 32 year-old Yergozhin, a fluent English speaker who received an MBA from Suffolk University in Massachusetts in 2003, had been vice minister of finance since January 2007. He replaces Nurlan Rakhmetov, who resigned on September 22 following the arrest on corruption charges of the deputy head of the Almaty city tax department. ¶3. (SBU) As vice finance minister, Yergozhin had strong views on taxation issues and was not afraid to express them publicly or privately. He was a proponent of several recent taxation initiatives which were aimed at enabling the government to capture a greater proportion of the profits from the national resources sector. One of these initiatives -- a mineral extraction tax -- was incorporated into the draft of a new tax code currently under consideration in parliament. Yergozhin also called for an export duty on metals -- an idea the government dropped following pushback from the powerful metals lobby. In a July 2008 meeting in Astana with U.S. Treasury Department officials, Yergozhin described as "unconstitutional" the fixed tax regimes incorporated into existing production sharing agreements (PSAs) with international oil companies. ¶4. (SBU) COMMENT: We worked closely with Yergozhin during the summer of 2007, when there was a virtual shutdown of U.S. exports to Kazakhstan which was caused by a legislative change requiring Kazakhstani importers to provide a shipper's document that could not legally be obtained from U.S. exporters. While we had to go well above Yergozhin's level to resolve what ultimately became a customs crisis -- with over $100 million in U.S.-origin goods stuck in Kazakhstani customs warehouses -- we found him open, responsive, and professional. While on paper Yergozhin's new position is a demotion -- since he will now report to a vice finance minister -- as a practical matter, it is a step up, an opportunity for him to put policy into practice as the country's lead tax collector. As Tax Committee chairman, he will also have the authority to initiate amendments to the tax code. We expect the bold and ambitious Yergozhin, a representative of the new generation of young, western-educated Kazakhstani bureaucrats, to be more aggressive, while at the same time more transparent and professional, than his predecessor. He was likely selected for this job for these very qualities. END COMMENT. HOAGLAND