The size of government in Tajikistan, taken the total public spending of 32% of GDP in 2017, is considerably smaller as compared to developed European countries, and more adequate for a country on this level of development. This situation leaves room for lower taxes, but also for lower level of government services and lower quality of government administration. High share of the shadow economy basically restricts higher tax receipts. Growth of the economy is robust, due to the rising consumption spurred by an increase in remittances of workers abroad (which represent a third of the economy), mostly from Russia, and rise in exports and capital spending. Government deficit was substantially reduced, reaching -2.4% of GDP in 2017, but the fiscal situation has been deteriorating again due to
large infrastructure projects whereby the public debt will surpass 50% in 2018. There were negotiations regarding an IMF support program, but it has not yet been agreed upon. The role of the state in the economy is still considerable, with numerous big state-owned companies active in many fields, even in those where state interference is mostly obsolete, such as finances, food processing and mining. The most important SOEs are industrial facilities such as the largest company in the country, the aluminum company Talco. SOEs are in a de facto preferential position, since they receive a large share of government procurements, and are also financed by banks via preferential loans that could be either waived or taken over by the government, making them more a subsidy than a loan. Many of these SOEs have reported high financial losses during the previous years, which burdens public finances. SOEs` management is not professional, due to strong political influences from the government, while being a strong part of the clientele network. The split of the national electric company, the Barqi-Tojik, into three companies, one each for generation, transmission and distribution, has not yet been accomplished. Tajikistan is in the process of shifting to International Financial Reporting Standards (IFRS), while in the meantime SOEs are using the national accounting standards which deviate from the best international practice. The share of non-performing loans (NPL) stood at more than 35% at the end of 2017, officially, but non-official estimates reported this to be much higher, which not only showed that the banking system was in crisis but could have strong fiscal consequences in case of bank bailouts. Personal income tax is progressive, with rates of 8% and 13% and a low non-taxable threshold. Corporate income tax is also progressive, with the rates of 13% and 23% - the lower rate is attributed to companies that produce commodities. Both rates were decreased by 1 percentage point from their previous level in January 2017. VAT stands at 18%. High social security contributions paid by the employer, coupled with the income tax, lead to a moderate labour tax wedge of 30% on the average wage in the country.