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AMERICAN Journal of Public Diplomacy and 
International Studies 

Volume 01, Issue 09, 2023 ISSN (E): 2993-2157 
 
 
 
 

Tax policy of Uzbekistan and its main directions 
 

Shakhzod Abduvakhobov  

Samarkand Institute of Economics and Service, Samarkand, Uzbekistan 

 

 

Annotation: This article describes tax policy and its main directions in the conditions of 

economic reform, directions of tax policy development, tax policy aimed at optimizing tax benefits, 

current problems of tax policy modernization, and the procedure for ensuring financial stability of small 

business and private business entities. 

Keywords: tax, tax policy, tax system, entrepreneurship. 
 

The currently formed tax system (list of main taxes, basic principles of tax base construction, 

proportional, progressive and regressive taxes, etc.) generally creates a great opportunity to develop a 

unified tax policy and build a stable revenue base for the budget. It concentrates the main force on the 

formation of the income base of the budget on direct taxation, and allows to radically modernize the 

direction of taxation on various elements of the tax system. But at present, these opportunities are not 

only not being used, but are also being consistently limited. Within the framework of the tax system, 

there are misunderstandings and conflicting opinions that reduce its effectiveness, they affect economic 

activity even in the conditions of moderate inflation, and the available opportunities are not fully used. 

Based on the existing tax structure, it can be observed that the main part of the budget revenues 

is formed at the expense of direct taxes, first of all, income tax of legal entities. But during 2005, indirect 

taxes continued to play a major role in the formation of budget revenues. But during 2005, indirect 

taxes continued to play a major role in the formation of budget revenues [1]. For example, in 1992, it 

accounted for 34% of all tax revenues, and VAT and excise tax reached 50%. In 2006, budget revenues 

returned to the pattern of 2005, as income tax did not become the main source of budget tax revenues. 

In such conditions, the indirect tax performs more of a fiscal function than a regulatory one, the main 

tax mechanism for stimulating economic activity does not work [2]. There is a tendency to deliberately 

increase the fiscal burden. In particular, the difference between the realized advance payments and the 

amount calculated on the basis of the actual taxable base needs to be adjusted to the Central Bank 

interest rate, that is, the budget and credit relations of economic entities are formalized with the payment 

of appropriate interest. If it were possible to predict indirect taxes with some degree of reliability, such 

a pressing issue would not arise. 

Even in the conditions of small changes in the exchange rate, uncertainty of payments by 

customers, the reliability of any forecasts is not high. As a result, the implementation of the mentioned 

measures will encourage enterprises to increase the advance payment and thereby credit the state 

budget. In the conditions of lack of working capital and their rapid devaluation, this measure is hardly 

compatible with strengthening the financial stability of the development of small business and private 

entrepreneurship entities. 

The instability of tax legislation seems to be the biggest damage to the existing tax system. Laws 

adopted during 1992-2005, amendments to them, issued guidelines almost led to a revision of the tax 

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procedure [3]. In these conditions, it is difficult to talk about any investment projects being encouraged 

by taxes. 

In 2000-2006, a significant increase in indirect taxes in revenues to the budget occurred mainly 

due to the fines imposed on enterprises for not paying taxes on time. This was known in advance due 

to the artificial reduction of the taxable base in tax accounts [4]. Since 2007, the revision of the taxable 

base, including tax calculations, has become more systematic. 

In 2000-2006, the redirection of the budget's revenue base to direct taxation on a significant 

scale did not directly succeed. The use of indirect taxation to stimulate the revenue base of the budget 

is limited by the solvency of entities, which is related to the nature of the collection of this taxation. 

This appearance acts as a limit to its use. 

It is clear from the world experience that the tax system built on the basis of indirect taxes 

ensures the stability of revenues to the budget and its less dependence on the nature of the economic 

conjuncture [5]. Indirect taxes form a stable and broad base of budget formation, any small increase of 

which has a significant impact on budget revenues. Thus, indirect taxes have qualities such as 

universality and have almost no effect on the relative specific positions of economic sectors. 

But in the conditions of price changes, it does not have a significant effect on the interest of 

small businesses and private entrepreneurs to increase or decrease production, where the price factor 

has a great advantage. Due to the extreme elasticity of our country's economy, indirect taxes could not 

fulfill the role of demand limiter. Indirect taxes are significant for the manufacturing enterprise only in 

case of a very high level of market saturation, when the consumer responds to the increase in the price 

of goods by reducing consumption, and the producer responds to the decrease in price by expanding 

production. 

Low price elasticity is characteristic of our country's economy in general, and it is connected 

with the characteristics of reproduction of a number of components of our economy (predominance of 

low-income population intended to purchase technical goods in the market, primarily consumer goods). 

As a result, the entire increase in prices due to indirect taxes is borne by the consumer [6]. That is why 

the attempt made in 1998 to reduce the standard rates of this tax and did not lead to a decrease in the 

final price of sales of food and children's goods (except goods subject to excise tax), did not expand the 

volume of supply of these goods and did not affect the rate of inflation. 

The lack of development of the accounting base, the lack of traditions on the application of the 

standard tax, the lack of training of our experts on their use, including VAT or excise tax, led to the 

fact that the object of taxation itself, including VAT, was not determined as the basis for their levy [7]. 

Therefore, there is a need for a number of simplifications in the calculations, which will lead to partial 

addition of the tax to the base in subsequent calculations. 

The inconsistency and disproportionality of various instruments of the currently used tax policy 

is clearly visible in the example of the relationship between VAT and export customs duties. The value 

added tax model envisages the active support of those exporters. Accordingly, the mechanism of its 

payment may depend on the refund of the amount of tax paid for the exported goods to the exporter. It 

seems that now this measure will be proportional to the mechanism of export duties, which is in effect 

in the experience of our country. As a result, there are counterflows of financial resources, crediting of 

the budget by exporters, because VAT is returned after customs payments are made and with a long 

delay. 

At present, the correct method of mitigating the impact of indirect taxation on the real level of 

consumption of low-income classes of the population has not been chosen. Year-on-year reductions in 

VAT rates and allocations, along with a reduced standard rate, have reduced this tax burden, which, 

unfortunately, has been unaddressed as it applies to all consumers. By the end of the year, the 

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application of the VAT refund regime for families under the legal age, based on tax returns and with 

relevant documents, has greatly helped in supporting the low-income classes of the population, and fuel 

for all indirect taxes for disabled people who own vehicles. it would be possible to establish 

compensation at the price. 

In most developing countries, tax legislation is formed based on economic and financial 

policies, taking into account the existing economic structure. Taxes and taxation laws in these countries 

are not often changed at random and at the whim of certain individuals. 

In the history of the development of society, not a single country lived without taxes [8]. Even in 

the conditions of the market economy, the state collects the main part of the funds necessary for the 

implementation of its internal and external tasks, various social, economic and political measures through 

taxes. In particular, taxes form the state, regional, and district budgets, create a financial basis for the state 

social program, manage the business activities of taxpayers, encourage their desire to use natural resources 

effectively, influence pricing, and regulate the standard of living of the population. With the help of benefits, 

it helps to organize the social protection of the poor sections of the population, etc. 

Therefore, the minimum amount of funds formed through taxes is related to the minimum amount 

of expenditure related to the performance of the state duty and is limited to this amount. 

Taxes and the mechanism of taxation and the rules related to it are expressed in the tax doctrine. 

The tax doctrine appears in the form of a generalized expression of the basic principles, norms and rules 

that become a common basis within the framework of the financial and economic policy adopted by the 

state, and retain their force in all current changes in taxation. 

The tax doctrine is reflected in views that are stable and protected for a long time by the state 

authorities and allows to positively solve the following main issues: 

- the role and importance of taxes in the country's system; 

- the share of taxes in gross domestic product and budget revenues; 

- determination of the mutual ratio of direct and indirect taxes, the most appropriate levels of tax 

collection for certain industries and sectors, for certain segments of the population; 

- progressiveness (regressiveness) of taxation; 

- tax procedures for encouraging savings and investments, forms of control of taxpayers' activities 

by tax authorities, etc. 

Tax policy is formed on the basis of the state tax doctrine. Although the adopted policy tax doctrine 

is subject to the requirements of a particular period, in some cases it may deviate significantly from the 

planned doctrine. But it should always be consistent with the doctrine announced in the future (or the tax 

doctrine should be changed accordingly). 

 

References 

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4. Oripovich, A. Z. (2021). Profit Tax in Uzbekistan: Analysis of The State of Collection and 

Optimization of Its Impact on Financial Relations. International Journal of Progressive Sciences and 

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