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2009 Assessment

Azerbaijan: Integrity Indicators Scorecard

Azerbaijan: Integrity Scorecard Report > Sub-Category: Business Licensing and Regulation
Indicators		Score
70	Are business licenses available to all citizens?	81
71	Are there transparent business regulatory requirements for basic health, environmental, and safety standards?	100
72	Does government effectively enforce basic health, environmental, and safety standards on businesses?	25

Indicator and sub-Indicator Details

Are business licenses available to all citizens?

70a: In law, anyone may apply for a business license.

Score:

YES

Comments: Article 10 of of the Law on Entrepreneurship Activity regulates the state registration of the entrepreneurship activity. Entrepreneurship activity may be exercised individually or by creating a legal entity. Under Article 33 of the Tax Code, any individual may apply to the tax agency for a business license in order to do private business and the agency opens a tax account for the individual entrepreneur within five days. Article 7-1 of the Law on State Registration of Legal Entities stipulates that a business license for establishing commercial organizations should be issued within no more than three days by tax authorities. It is worth noting that as of Jan. 1, 2008, registration of commercial organizations is done according to the "one stop shop" principle with a unified procedure centralized and implemented under the responsibility of the Ministry of Taxes. Under the new system, now it takes only three days and one procedure to get registration after the required documents have been submitted. As it is stated in 2008 Report of the Commission for Combating Corruption on Implementation of the National Strategy, before the introduction of this system, business owners needed 30 days and had to go through 15 legal procedures to register a business.

References: The Law on Entrepreneurship Activity; The Law on State Registration of Legal Entities; The Tax Code of the Republic of Azerbaijan [ LINK ]

70b: In law, a complaint mechanism exists if a business license request is denied.

Score:

YES

Comments: Under Article 11.5 of the Law on State Registration of Legal Entities, an applicant may go to the superior agency or court for appealing a rejected license. Furthermore, under Article 15.1.9 of the Tax Code, the applicant may appeal against the action (inaction) of the tax authority to the administrative body and/or to court.

References: Superior Administrative Agency and/or courts; The Law on Entrepreneurship Activity; The Law on State Registration of Legal Entities; The Tax Code of the Republic of Azerbaijan [ LINK ]

70c: In practice, citizens can obtain any necessary business license (i.e. for a small import business) within a reasonable time period.

Score:

100

Comments: As from Jan. 1, 2008, the introduction of a "one stop shop" system for state registration of business organizations has become an efficient step in reducing corruption in starting a business. Under the new system, now it takes only three days and one procedure to get registration after the required documents have been submitted. According to the 2008 Report of the Commission for Combating Corruption on Implementation of the National Strategy, before the introduction of this system business owners needed 30 days and had to go through 15 legal procedures to register a business. Reduction of obstacles for business registration has resulted in a sharp increase in the number of companies registered in Azerbaijan. From January 2008 to June 2008, 24,000 new business entities, including 2,000 companies, have been registered, representing a 30 percent increase. According to the World Bank's Doing Business 2009 Report, Azerbaijan has been the world's leading reformer of business regulations with improvements in seven of the 10 areas studied by the report See [ LINK ]

References: 1) World Bank's Doing Business Report on Azerbaijan [ LINK ] 2) 2008 Report of the Commission for Combating Corruption on Implementation of the National Strategy (2007-2011) for Increasing Transparency and Combating Corruption [ LINK ] 3) GRECO (Group of States against Corruption) Compliance Report on Azerbaijan, Oct. 10, 2008 [ LINK ] 4) Interview with a group of lawyers, September 2009

70d: In practice, citizens can obtain any necessary business license (i.e. for a small import business) at a reasonable cost.

Score:

100

Comments: In Azerbaijan, there are about 57 activities that require licensing under the Presidential Decree on Granting Special License to Defined Activities. Some of them are expensive, for example license price for banking service is 22,000 AZN (1 AZN is equal to USD 1.20), for insurance service is 22,000 AZN, for tourism service is 5,500 AZN. Study shows that there are also some areas where license is not expensive, but bribe is required for receiving it, for example taxi service, medical service as well as construction works. The Decree states that auditor service is 2200 manat, post service is 2500 manat (decree is available at [ LINK ]

Furthermore, it is worth noting that opening commercial organizations usually meet the reasonable cost requirements in practice. Under Article 20.3 of the Law on State Fee, generally, the state fee for the registration of commercial organizations is 11 AZN which should be paid to the notary. The receipt should be submitted to the Tax Ministry along with other registration documents. According to the interview with a group of lawyers dealing with registration issues, after the establishment of the "one stop shop" system in Azerbaijan, the registration takes three working days and costs 11 AZN, as stated in Law. No additional fee is needed unless the notary may ask an extra "state fee". But it is a matter of active citizenship. In other words, different licensing has different regulation and implementation practice.

Peer Review Comments: Some problems for those who want to obtain business documents may be:

It's not allowed to name the business entity in foreign language, they all should be in Azerbaijani.

According to the new amendments to the law on apartments, a living apartment should not be physical address of any business or non-profit organization.

Peer Review Comments: Licenses are required for approximately 50 business activities in Azerbaijan. Some of them are very expensive. For example, the license price for post service is 5,000 manat (US$6,228) and 10,000 manat (US$12,456) for auditor service. In some areas, a license isn't expensive, but a bribe is required for receiving it, for example, taxi service. A great bribe is required for receiving a license in construction work, tourism and medical services. If a bribe will not be given, an artificial barrier is put in front of people who want to receive licenses. This is also the with imports.

Are there transparent business regulatory requirements for basic health, environmental, and safety standards?

71a: In law, basic business regulatory requirements for meeting public health standards are transparent and publicly available.

Score:

YES

Comments: Public health standards are generally in place in various laws of different nature and they are publicly available.

References: Legislation of the Republic of Azerbaijan [ LINK ]

71b: In law, basic business regulatory requirements for meeting public environmental standards are transparent and publicly available.

Score:

YES

Comments: Public environmental standards are generally in place in various laws of different nature and they are publicly available.

References: Legislation of the Republic of Azerbaijan [ LINK ]

71c: In law, basic business regulatory requirements for meeting public safety standards are transparent and publicly available.

Score:

YES

Comments: Public safety standards are generally in place in various laws of different nature and they are publicly available.

References: Legislation of the Republic of Azerbaijan [ LINK ]

Does government effectively enforce basic health, environmental, and safety standards on businesses?

72a: In practice, business inspections by government officials to ensure public health standards are being met are carried out in a uniform and even-handed manner.

Score:

100

Comments: Business inspections to ensure that public health standards are met are routinely carried out by government officials in an ad hoc, arbitrary fashion designed to extract extra payments from businesses in exchange for favorable treatment.

References: 1) Interview with a group of business owners, September 2009 2) Newspaper materials and articles of the Radio Liberty-Azerbaijan [ LINK ]

72b: In practice, business inspections by government officials to ensure public environmental standards are being met are carried out in a uniform and even-handed manner.

Score:

100

Comments: Business inspections to ensure that public environmental standards are met are routinely carried out by government officials in an ad hoc, arbitrary fashion designed to extract extra payments from businesses in exchange for favorable treatment.

References: 1) Interview with a group of business owners, September 2009 2) Newspaper materials and articles of the Radio Liberty-Azerbaijan [ LINK ]

72c: In practice, business inspections by government officials to ensure public safety standards are being met are carried out in a uniform and even-handed manner.

Score:

100

Comments: Business inspections to ensure that public safety standards are met are routinely carried out by government officials in an ad hoc, arbitrary fashion designed to extract extra payments from businesses in exchange for favorable treatment.

References: 1) Interview with a group of business owners, September 2009 2) Newspaper materials and articles of the Radio Liberty-Azerbaijan [ LINK ]