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The concept of reforming the country's tax system has been submitted for public discussion

Tomorrow in Uzexpocentre, the National Project Management Agency will organize a public discussion of the draft Concept of Reforming the Tax System of the Republic of Uzbekistan (beginning at 10:00).

The strategy of actions for the five priority directions of the development of the Republic of Uzbekistan in 2017-2021, one of the key directions in the sphere of development and liberalization of the economy, is the continuation of the policy of reducing the tax burden and simplifying the taxation system, improving tax administration and expanding measures of appropriate incentives.

At the same time, the current taxation system does not meet modern requirements, restrains the further development of the economy, does not stimulate the expansion and modernization of production, does not provide the most favorable conditions for doing business, in particular:

- the level of the tax burden on business entities remains extremely high (this indicator in Uzbekistan is higher than in most of the CIS countries), which causes the withdrawal of income in the shadow turnover;

- the stability of the tax legislation is not ensured, a complex system for calculating taxes and other mandatory payments has been formed, including a simplified taxation system, while a large number of by-laws establish exemptions and special rules for calculating taxes that increase the tax burden and transaction costs of business;

- there was a significant difference in the level of tax burden between individual entrepreneurs, small and large businesses (an average of 3-4 times), while if the share of small businesses in the gross domestic product is more than 50 percent, then in the structure of tax revenues, they account for slightly more 7 percent;

- the high rate and the system of levying value-added tax (VAT) distracts circulating assets of taxpayers, leads to a rise in the cost of intermediate and final consumer products, hinders the development of cooperation between large and small businesses;

- the existence of various payments to the targeted state funds, in fact, are negotiable taxes, leads to an increase in the tax burden;

- the current system of taxation of property of legal entities restrains investment in production capital facilities and infrastructure, and also leads to an increase in capital-intensive industries;

- high rates of personal income tax and unified social payment lead to an underestimation of the wage fund and, ultimately, the payment of wages in "envelopes" (personal income tax pays only a third of the number of citizens of working age);

- there was a wide practice of supporting economic entities through tax concessions, including individual benefits, deferring or writing off tax debts, which significantly limits healthy competition, while there is no effective monitoring system and monitoring the effectiveness of the benefits provided.

At the same time, ineffective tax administration negatively affects the level of revenues of the State Budget of the Republic of Uzbekistan, does not ensure an adequate level of tax collection and other obligatory payments, in particular:

- there is no effective exchange of information between state bodies and organizations using advanced information and communication technologies;

- up to now, advanced forms and methods of E-administration of taxes and tax control have not been introduced, including a unified system for electronic registration of invoices, cash registers that transmit information about transactions to the tax authorities in the "online" mode;

- an effective system of analysis and management of risks in the implementation of control activities has not been developed, which negatively affects the effectiveness of inspections and prevents the reduction of interference in the activities of bona fide business entities;

- there is an extremely low collection of local taxes and fees due to weak mechanisms for their administration, including shortcomings in the sphere of accounting and objective valuation of real estate and land plots;

- an effective system of pre-judicial settlement of tax disputes has not been developed, which leads to an increase in taxpayers' appeals in the judiciary, thereby increasing the costs of business and causing dissatisfaction among entrepreneurs;

- due to the complexity of the tax legislation, there is a very low effectiveness of explanatory work, as well as preventive measures and early warning of tax violations.

These shortcomings adversely affect the investment attractiveness, since the current tax system in the eyes of most investors does not provide clarity, healthy competition, transparency of tax administration, an acceptable level of tax burden and guarantees of protection of investors' rights.
The full text of the Concept can be found here.  
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