Blogs Namig Aghayev

“Your pocket or state’s pocket” what is the difference?!

04.12.2013

“Your pocket or state’s pocket” what is the difference?!

One of the most discussed issues of the past few days has been the increase in gasoline prices. Ask whoever you wish, everyone will undoubtedly state their unhappiness about this. Every member of society - the poor, the middle class, the well-off, even the workers of various institutions and bodies who took part in the falsification of elections and teachers who were actively participating in the “carousel” during the elections – they all understand the negative impact of this increase.

They understand, but as much as they do, they try to square this circle of change with attempting to rationalize it as well. The strangest thing is that people think that the head of state is innocent of any responsibility and blame various power structures and ministries instead. They naively create petitions and appeal to the president for help. They exclaim that: “The president is good – it’s his circle that’s bad” and go on to blame the Tariff Council and SOCAR. While most know that the Tariff Council is a formal government structure, I will though try to explain the irrelevance of SOCAR in this regard.

First, the price of oil products have not increased. Rather, the increase is for the excise value applied to them. So, the selling price of oil products within the country was 300 AZN and, lo and behold, it is still 300 AZN. Due to the increase of the excise value VAT tax, this automatically increases, which in turn impacts the overall price.

This is a concept that is very well known to economists. They are more than aware that the excise and VAT taxes entering the accounts columns on spreadsheets are from sales paid to the budget until the very last AZN. Therefore, this issue actually has nothing to do with SOCAR. So statements that, “SOCAR will increase gasoline prices in accordancw with the Euro 3 standard” are totally baseless.

The main objective of this article is to show how the government gets in the pockets of people in order to fill the budget deficit.

We know that the structure which provides the country with gasoline and oil products is SOCAR. The national oil company produces 600,000 tons of oil for national use and then from processing this oil it gets 650,000 tons of oil products. Approximately 350,000 tons of these products are used domestially and the rest is sold abroad.

Therefore, I present to you the “Top 5” of produced and sold products...

Gasoline.

The country produces 120,000 tons of gasoline every month on average. Only 45 million AZN was paid to the budget as VAT and excise value from the gasoline total, the value of which was 80 million AZN. But considering that, after the recent rise of prices, the excise value of gasoline has risen from 300 AZN (average for A80, A92, A95) to 400 AZN. This makes for a 33% rise. That means that the aforementioned taxes will rise to 57 million AZN (80 million / 1.18 – 30 million + 30 million * 33% * 18%). Through that mechanism, transportation prices, including agricultural products to Baku, will increase.

By this the transportation prices including for the transportation prices of agricultural products to the capital will increase.

Diesel.

120,000 tons of diesel on average is sold every month. 20 million AZN are paid as excise and VAT tax from 60 million AZN, which is the value of the total sale. Excise tax for diesel is increased from 80 AZN to 185 AZN, making an increase of 131%. Projections show that in the next month, 34 million AZN will enter the budget instead of 20 million AZN from excise and VAT tax. If we consider that the main users of diesel gas are heavy machinery used by construction companies and railroad transportation, then the industries that will get hit the hardest are clear.

Jet engine fuel.

55,000 tons of this product, which is mainly consumed by AZAL, is produced on average every month and then sold for 15 million AZN. The portion of taxes is from this is 5 million AZN. The previous excise value of this product was 30 AZN and has now been increased to 150 AZN. This is a 400% increase. This means that from now on, 14 million AZN of excise and VAT tax will enter the budget from sales of jet engine fuel. Flying with AZAL is expensive anyway and now the plane tickets will increase even more. Also don’t forget that a lot of products are imported into the country via air freight.

Black oil and bitumen.

Approximately 8 million AZN of black oil is sold on average every month and 1.5 million AZN is raised from this in taxes. Previously, 11 AZN of excise tax was paid for each ton of black oil and according to the new prices, that has now become 145 AZN per ton. That is an eye-widening thirteen-fold increase or an even more ridicilous 1200% increase. Bitumen’s excise increased by 540%, from 34 AZN to 220 AZN. That means that 9 million AZN will enter the budget from black oil and 8 million AZN from bitumen. It should also be mentioned that per the old prices, taxes were just 1.5 million AZN. So this means that since the price of road construction will increase, so the road tax will increase as well.

Gas.

Azerigaz, which provides retail gas to the general population, kept their prices at the previous 42 AZN rate. In comparrison, Azenerji, who provide electric energy services to both the people and institutions, increased their prices to 82 AZN. So as you can see, we will face an increase in prices for our electric usage in the near future. At the same time, factories and plants using gas will pass on those costs to consumer users. So in a word, this will be a double blow to the purses and wallets of average citizens.

Let’s look at the results. In total, 49 million AZN of tax will enter the budget, of which 12 million is from gasoline, 14 million from diesel, 9 million from jet fuel and 14 million from black oil and bitumen. This is approximately 600 million AZN per year. When counting taxes from the sales of gas, electricity and other products increasing cumulatively we can easily say that, in order to close down the budget deficit, approximately 1 billion AZN will enter the budget. And you, ordinary people, are going to pay for this. So hold your pockets tight, because there are people who think that your pockets are their pockets.

Namig Aghayev

"The military budget of Azerbaijan is larger than the Armenian state budget".

You have probably heard these words from the head of state and on TV channels. Since I like analogies, I will offer one here as well. It looks as if “Papa’s Son”, who became rich after the event, is bragging about his wealth. You have a large budget, but what is it allocated for though? With Zahid Oruj in mind, have you returned those 200 meters of land? Of course not. Had you done so, AzTV would have been talking about it every day. Anyhow, I digress…

For four years now, SOCAR has been donating 2% of its employees’ salaries to the Assistance Fund of the Armed Forces of the Republic of Azerbaijan. According to the calculations of independent NGOs who monitor this, that amount is approximately 9 million AZN per month. This is no small amount. So, it is unclear why the ministry is bragging about its money in front of other countries? In other words, why is it acting like an uncouth beggar? If the armed forces really needed this money, the state or the oil fund could easily meet such a request. Therefore, demanding “then what does it want from us – oilers?” I appealed to the leadership as follows:

"I would like to state that I refuse to pay my “voluntary” donation of 2% from my monthly salary to the Fund of the Armed Forces. My considered reasoning is that the Ministry of Defense budget, which is higher than the overall budget of a close proximity “hostile” country, should not need such a small amount from the salary of an ordinary employee. Therefore, taking the aforementioned reason into consideration, I would ask you to cancel the 2% donation from my salary to the Fund of the Armed Forces.”

And yes! After this appeal they stopped taking donations from my salary. Since this donation is named voluntary, why would they not? And here’s the thing – the donation to the Fund of the Armed Forces is designated as being voluntary, but yet nobody pays it with any enthusiasm in SOCAR. But for some reason, people do not protest against this payment and afford it an unwarranted “compulsory” character. As far as I understand, this payment is not taken by force, but ordinary oilers do not pay this donation voluntarily either. Many have the impression that they will face artificial obstacles at work and maybe even fired if they protest against this payment. However, from personal experience, it becomes clear that this is built on nothing more than fear alone – and fear ultimately is an emotion to be found in one’s own hands. I am now personally free from this fear, since I have paid one of the two debts to my Motherlands by serving in the army for three years. My second debt is the fight for the territorial integrity of our country. And yet I understand the fear of “men” who illegally evade military service and work at SOCAR. Their tongue can for sure be short. But what about the others?! Talking of military service, as far as I know and according to unofficial sources, 35% of SOCAR employees are fully healthy and therefore eligible, yet they evade military service. This will be the topic of our next post.

Good Guy Whose Circle is Bad

We all recall the tragic traffic accident a few days ago involving the people’s artists, tar player Aghasalim Abdullayev. The son of a high ranking official, who was drink-driving, caused this terrible tragedy. The issue made it to the President’s desk, criminal proceedings were opened and the perpetrator’s father was dismissed from his high position of power.

The right decision on first glance? OK, but what if the head of state had not intervened in this issue? What if this had happened not to the people’s artist, but to an ordinary citizen? Quite possibly, this incident would have been hidden so as to conceal the crime of an officials’ kid. In contrast, the son of an MP shot his firearm 8 times into the car of a woman driver, from his expensive car, by way of “making his acquaintance” and yet was left unpunished. Why? Simply because the president did not intervene. This shows us plenty of evidence that only the issues intervened in by the president are resolved in this way. Consequently, the law does not work or if it does, it works against the poor.

Maybe this is the reason why ordinary people write letters to the president and his wife asking for solutions to both big and small problems. Azerbaijani post offices see thousands of letters addressed to the presidential administration and the Heydar Aliyev foundation every single day. Some ask for work for their children, while others ask for healthcare assistance or an increase in their pensions. If one day I heard that someone wrote a letter to the president asking him to change the defective lamp in their building, I would not be surprised. That’s because everyone sees that the issues only potentially get resolved after the intervention of the president. And as the legend goes, the cause for unresolved issues is actually the president’s circle that either doesn’t deliver the letter to the president or it doesn’t deliver it in the right form.

The cries of: He would have solved it had he known about it! Maybe he does not have the time?! Maybe he is busy?! But busy with what? He does not react to geopolitical challenges and situations in foreign and neighboring countries and is indifferent to internal social problems and the general political situation. What is he busy with then?! Is he busy with the opening of over-ground or underground passages, or maybe the napkin factory? If not, maybe it’s the discussion of our national cuisine, the price of an egg or possibly car window darkener with his cabinet of ministers?! Does he not have a minute to get information about the situation in the country through the internet or media?!

· But, thank God, the people’s opinion is a clear indicator as to what is happening. They see mass urban construction and renovation in the country. They see 500% growth of the economy and how inflation has now decreased to a manageable 5%. Those who do not see this are clearly pro-Armenian elements financed by hostile Western elements.

So let’s return to the main issue here. If the president ultimately decides everything in the country anyway, and a citizen appeals directly to the president with regards to his or her personal problems, then what are the constitution, parliament, ministries and other institutions necessary for?! Other bodies cannot execute their duties independently anyway. Nobody believes in the justice of the courts, quality of healthcare, quality of education, guarantees of security and so on. Everyone expects justice, health and security from the president and his wife. Maybe the reason for these expectations is that, the president is good and his circle is bad? But no, “bad guys do not hang out with a good guy”…