The dominant feature of Kazakhstan's government is the transition from communism. As a part of the Soviet Union until 1991, Kazakhstan was a testing ground for many important communist policies of the USSR. The communist system was distinguished by a powerful central government, an official state ideology of Marxism , and a centralized, planned economy. The communist government took control of the means of production (farms, factories, and natural resources) in the early 1920s through a process of nationalization . The changes in the Soviet Union began in 1988 with the introduction of open and relatively free elections. Kazakhstan's first open election was held in February 1990. Nursultan Nazarbaev— then the first secretary of the Kazakhstan Communist Party—was elected chairman of the Kazakhstan parliament. A short time later the parliament passed the Kazakhstan Declaration of Sovereignty. The true meaning of the declaration was somewhat obscure. Kazakhstan became a sovereign government but remained within the larger government of the Union of Soviet Socialist Republics, the Soviet Union. As the Soviet Union began to unravel in the autumn 1991, President Nazarbaev scheduled popular elections. Running without opposition, he won the election and became Kazakhstan's first popularly-elected president. Just 2 weeks later the Kazakhstan parliament adopted the Kazakhstan Declaration of Independence, and Kazakhstan became truly independent.
In the first 2 years following the disintegration of the USSR, Kazakhstan began to define its strategy for the transition from communism to a market-based economy. One of the most important elements in this transition is the transfer of property rights from the government to the private sector . If property belongs to everyone—as is the case under communism—it is often treated as if it belongs to no one. Establishing private property rights is, therefore, a first step in the transition to the economically rational use of resources. In 1993 the Kazakhstan government adopted a privatization program to return control of economic assets to the people themselves.
The most important stage of privatization in Kazakhstan took place between 1994 and 1997. Sales and public auctions were held to distribute the country's 4 categories of properties: the country's major industries, mines, and oil fields; large factories; small shops, stores, and apartments; and agricultural enterprises. The "caseby-case privatization program" sold most of the country's major industries, mines, and oil fields. The "mass privatization program" held auctions for most of the country's large factories. Most small shops and stores were sold in the country's "small scale privatization program." Agricultural enterprises were privatized, although agricultural land itself was not. Residents were also allowed to privatize the apartments and houses in which they were living at the time. Residents were required to pay a nominal sum for their property, but there were few cases of people who were left without hearth and home by the privatization program.
In December of 1991, Communist Party chiefs of 11 of the former 15 Communist Party organizations of the USSR gathered in the Kazakh capital (then called Alma-Ata) in a dramatic meeting to decide what to do about the collapsing Soviet Union. The outcome of this meeting was the Alma-Ata Declaration, announcing that the Union of Soviet Socialist Republics would "henceforth cease to exist." The Alma-Ata Declaration also established a loose coordinating structure called the Commonwealth of Independent States (CIS) and sanctioned the emergence of 15 new and independent states from the former Soviet Union. Kazakhstan was one of these states.
In its first decade of independence Kazakhstan made great progress in the transition to a modern, democratically governed state with a market-based economy. The steps the Kazakh government has taken over these years of independence follow a textbook description for the establishment of a civil society—a constitutionally organized, secular society based on the rule of law, the protection of human and civil rights, and the limited role of popularly elected, accountable government. The Kazakh government established the fundamental institutions of civil development, such as a constitutional form of limited government based on a separation of powers, open electoral process, a professional judiciary, a deliberative parliament, free press, and the rights of speech, assembly, and religion. The government also initiated and carried through the process of selling the state's assets to the public through privatization.
The Kazakh government carried out macroeconomic reforms including true price liberalization , freeing the markets from government controls. It also established the legal and regulatory structure of a private economy, including a modern civil code and tax, banking, and investment laws that accord with international standards. The Kazakhstan government relinquished control of the nuclear weapons on its territory in accordance with international treaty agreements. And, although it is not entirely unblemished, Kazakhstan's record of protection of human and civil rights compares favorably with that of its former Soviet neighbors.
Kazakhstan enacted its first post-communist tax code in April 1995. The Kazakhstan tax code is based on international standards and stresses equity , economic neutrality, and simplicity. Taxation takes place at the 3 levels of government: central, provincial (called an "oblast" in the Russian language), and local. The 3 most important taxes are the enterprise profits tax, the individual income tax , and the value-added tax (VAT). Profits for most private firms are taxed at a rate of 30 percent. Most business expenses are deductible, including wages. The individual income tax ranges from 5 to 30 percent. The VAT is applicable to all goods, work, and services, including imports into Kazakhstan. The VAT on imports is usually 20 percent of the value added , or the difference between the purchase and resale price. In addition to these basic taxes, there are a number of other, less common taxes such as the natural resource tax paid for the right to explore for oil and other mineral resources. Land is taxed annually. Business assets are taxed at .50 percent yearly. And individually owned land is taxed at .10 percent of the assessed value. Automobiles and trucks are taxed on their value.