Experts, businessmen suggest reducing the VAT rate from 20 to 12%

The Expert Council “Vector of reforms” at the Center for Economic Development recommends reducing the rate of value added tax (VAT) from 20 to 12%.

“The Expert Council recommends reducing the VAT rate from 20 to 12%, eliminating as many benefits and exceptions as possible both on VAT and other taxes, including customs payments,” the center’s website reports.

President Shavkat Mirziyoyev ordered to reduce the VAT rate on September 11, during a video-conference meeting to discuss further development of small business and private entrepreneurship. It is expected that it will be reduced from the current 20 to 15%.

According to the council’s experts, a high VAT rate is not only a key reason for the persisting gap in the tax burden between the two taxation regimes which encourages businesses to go into “shadow”, but also a factor in reducing the competitiveness of domestic producers: the regional neighbors - Kazakhstan and Kyrgyzstan - have a 12% VAT rate. 

The problem of narrowing the gap in the tax burden between the general and simplified taxation regimes has not been completely resolved. As a result, in some sectors of the economy, enterprises of general and simplified regimes are in unequal conditions. This, experts say, stimulates general-regime enterprises to hide revenues and disaggregate their business in order to evade taxation. 

The Expert Council “Vector of reforms” recommends that comprehensive work should be carried out to reduce the costs of tax administration. This includes simplification of the procedure for calculating, paying VAT and income tax.

The “Vector of reforms” project was initiated by a group of scientists and businessmen in August 2019 to assist the Government of Uzbekistan in the formation and implementation of a long-term growth strategy, in creating favorable conditions for doing business in the country.