Tax Reform Concept Open for Public Discussion
In accordance with the decree of the head of state, the National Agency for Project Management under the President of Uzbekistan has prepared a draft concept on the radical reform of the tax system. In Tashkent, a public discussion of this document took p
Speakers noted that in recent years a number of measures have been taken in the republic to improve the tax system and tax administration. At the same time, the current situation in this sphere does not yet meet the principles of a free market economy; it does not allow to increase the competitiveness of the economy because of the continuing high tax burden on business, a large number of taxes and the complexity of their administration procedures.
A high level of tax burden leads to the withdrawal of capital in the shadow turnover. A significant difference in the level of tax burden between small and large business entities (an average of 3-4 times) hinders the expansion of production and the enlargement of business entities.
The high rate and complexity of the VAT collection system lead to a diversion of the taxpayer's working capital, a rise in the cost of intermediate and final consumer products, and the lack of effective cooperation between large and small businesses.
The current system of taxing property of legal entities restrains investment in production capital facilities and infrastructure, leading to an increase in the costs of capital-intensive industries.
The imperfection of the system of taxation of incomes of individuals leads to an underestimation of the wage fund and, ultimately, to ‘gray’ salary schemes.
Inefficient tax administration generally negatively affects the level of revenues of the State budget.
These and many other shortcomings of the current system significantly reduce the investment attractiveness of the republic, because in the eyes of most investors, Uzbekistan does not provide an understanding of the norms of tax legislation, healthy competition, transparency of tax administration, acceptable level of tax burden and guarantees for protecting investors’ rights.
During the discussion, it was stressed that the tax reform should reduce taxes on ‘labor’. Today they make up 30.5% -55%. Such a high level of taxation leads to the fact that out of 12 million able-bodied citizens, only 5 million pay tax. The business ‘saves’ on payroll taxes, without drawing up workers or applying ‘gray’ wage schemes.
The proposed rate of single tax on income from labor (25%) is only at first glance high. According to experts, in fact, it will be divided between the employee and the business - by 10% and 15%. If this is the way to look at this tax, then withdrawals from wages will decrease by an average of 1.6 times. For skilled workers with a high level of pay, the tax burden will be 2-3 times lower!
The developers explained that it was a question of the rate of the tax on income from labor. Tax rates for other income may be lower.
The authors of the concept explained in detail that it provides for reducing the tax burden, reducing the VAT rate, unifying and abolishing a number of taxes and mandatory payments, as well as measures to improve tax administration.