Seems like the golden rush for mining in Kazakhstan is over, as Majiis has approved the latest amendments to the tax code on May 25, Ministry of National economy reports. The 1-tenge tax that miners paid at the beginning of 2022 seems ridiculously low compared to the 3 to 10 tenge tax grading in different regions of Kazakhstan. QazMonitor studied the letter of law to find out how much exactly will miners have to pay. Spoiler: there is still a way to stick to that 1 tenge tax - but it's not for everyone.
Sweet bill, bitter tax
At the Majilis meeting, the minister of National Economy replied to a concerned deputy who was worried that miners will fleet to cheaper regions of the country.
"Differentiated rates are proposed to equalize the load and discourage consumption of our own electricity: the lower the cost of electricity, the higher the rate of payment."
Here are the exact figures according to the project of the law:
10 tenge of tax burden if 1kWh costs 5-10 tenge;
7 tenge tax for 10-15 tenge electricity price;
5 tenge tax for 15-20 tenge;
3 tenge tax for 20-25 tenge rate;
1 tenge tax for the payment rate of 25 tenge and higher;
Crypto goes green?
The law also states that "using renewable energy sources, regardless of the cost of electricity, the rate of payment is 1 tenge per 1 kilowatt hour of electricity consumed in the implementation of digital mining."
While the figures bring most crypto miners roughly same expenses, 'green' mining could potentially become a new popular direction. Yet, the reaction of the industry is still to follow. In February, the president of Data Center Industry and Blockchain Association of Kazakhstan commented the proposed 10-time tax rise as follows:
"Unfortunately, Kazakh companies do not make fabulous profits to be able to pay a 10-fold increase in taxes. The main margin in the mining industry belongs to business owners, who are often foreign investors. The Kazakh companies are mainly representing the hosting business. As a result, what do we have from the planned innovations? After increase of tax on mining, foreign investors will most likely leave our market, and domestic companies will be left in losses, without having a chance to recoup their investments and deprive average Kazakhstani citizens of a source of income."