Uzbekistan considers scrapping 1% tax cashback on purchase receipts

The proposal was put forward by the Institute for Fiscal Studies under the Ministry of Economy and Finance, which focuses on reducing the shadow economy.

According to the institute, spending on the cashback program has risen steadily since its introduction. Cashback payments amounted to UZS 820 billion in 2022 and could reach UZS 1.8 trillion in 2026 if the current mechanism remains in place.

The institute noted that the projected cost is twice the UZS 900 billion allocated in this year's state budget for the construction of kindergartens.

"The mechanism requires permanent financing from the state budget. As the number of registered fiscal receipts increases, budget expenditures continue to grow accordingly," the institute said in an analytical article.

In May 2026 alone, total cashback payments reached UZS 146.6 billion. Of that amount, UZS 15.7 billion, or 10.7%, went to customers of the country's 10 largest retail chains.

According to the institute, this suggests that a significant share of government support is already benefiting consumers shopping at businesses that operate fully within the formal economy.

"As a result, the state budget is effectively subsidizing transactions that would most likely have taken place even without the cashback program," the authors said.

The institute argues that budget-funded incentives should be viewed as a temporary tool for improving tax compliance and fostering a stronger tax culture rather than as a permanent feature of tax policy.

It also noted that international practice generally does not regard financial rewards for requesting purchase receipts as a universal or long-term tax policy instrument.

State lottery proposed as alternative

Instead of guaranteeing cashback for every registered receipt, the institute proposes introducing a state lottery for consumers who register receipts issued by businesses operating in sectors with elevated tax compliance risks, such as restaurants, cafes, and small retail outlets.

According to the proposal, this approach would preserve consumers' incentive to request fiscal receipts in industries where underreporting of revenue remains more likely.

The institute estimates that allocating up to UZS 100 billion for state lotteries offering cash prizes and valuable rewards, including cars, travel packages, and other prizes worth more than UZS 5 million, would be sufficient. Such a system could reduce state budget spending on the incentive mechanism by nearly 20 times.

12% VAT refund for low-income households unaffected

The institute emphasized that the proposal does not affect the existing mechanism that refunds 12% VAT on socially significant goods purchased by individuals listed in the Social Register.

Unlike the 1% cashback scheme, the 12% VAT refund is targeted at low-income households and is intended to reduce their tax burden rather than combat the shadow economy.

Uzbekistan introduced the 1% cashback program on January 1, 2022. Since January 1, 2024, the maximum cashback an individual can receive in a calendar month has been capped at 0.6 of the base calculating amount, currently UZS 247,000.