Analysis and Assessment of the Modern State of the Tax Base in Azerbaijan

Abstract

The article examines the current state of Azerbaijan’s tax base for 2024–2025, analyzing its structure, efficiency, and challenges. Using a mixed-method approach that combines quantitative data from official and international sources with qualitative policy analysis, the study finds that Azerbaijan has made significant progress in tax administration, diversification of revenue sources, and increasing registered taxpayers. In 2024, total tax revenues reached $12.98 billion, though the tax-to-GDP ratio slightly decreased from 17.9% to 17.5%. The tax base remains heavily reliant on income tax and VAT, while a substantial share is categorized as “Other Taxes.” Efforts to diversify into non-oil sectors have been supported by targeted tax incentives, such as reduced branch profits tax and exemptions for agriculture, renewable energy, and technology sectors. However, challenges persist, including the large informal economy, limited non-oil sector contributions, and the need to improve collection efficiency. Projections for 2025 indicate continued revenue growth, driven by diversification policies, but with potential risks from expiring tax exemptions. The study recommends enhancing compliance through digitization, expanding taxable activities, and reassessing the impact of incentives to ensure fiscal sustainability and economic resilience.