Uzbekistan's State Statistics Committee recently issued a release on the growing number of VAT payers, noting, among other things, that the VAT rate will be reduced from 15% to 12% from 1 January 2023. How would the State Tax Committee compensate for these funds? Mubin Mirzayev, First Deputy Chairman of the State Tax Committee, has answered this question in an interview with a 'Daryo' reporter.
‘The number of VAT revenues will surge in 2023 compared to 2022’
Uzbekistan last cut its main VAT rate on 1 October 2019, reducing it from 20% to 15% under the Tax Code adopted in 2019. On January 1, 2023, Uzbekistan is to cut VAT to 12%, allowing the local enterprises, organizations, and Uzbek citizens to keep on hand over 14 trillion UZS. This change demands hard work to prevent budget loss and develop an effective compensation strategy by improving the tax administration.
Preliminary, it is planned to cancel some tax benefits. Secondly, we need to do a lot to tackle the shadow economy. It won’t be easy. Only hard work accompanied by knowledge and skills can make up for it.
We plan to collect more VAT revenues in 2023 than in 2022; it is only possible by the means of digitization. In 2020, despite the pandemic, we introduced mandatory electronic invoicing; all invoices are now fully submitted electronically. It was the first step towards the digitization of the economy and the legal operation of enterprises. In 2023, we want to digitize electronic waybills and transport documents. As a result, 2 trillion UZS in VAT, 2 trillion UZS in profit tax, and in general, about 6.5 trillion UZS of additional funds would be collected along with the improvement of tax administration. If these plans are implemented, the state budget revenues will be stable.
‘The activities of informal workers will be authorized’
The authorization to work is one of our key priorities for 2023. We must create new jobs and provide the population with a decent income. We strive to register all workplaces with the tax authorities by listing those who work based on a contract and ensuring that their legal work is implemented in full. We cooperate with entrepreneurs to register and account for their employees in the tax authorities. We should also think of mechanisms to encourage them. We will create a system where entrepreneurs can legally employ their employees in full. Now more than 14mn people in Uzbekistan can work. 7mn of them are wage earners, and more than 3mn are migrants. We need to legalize the remaining 4mn people. For them to receive a pension when they reach retirement age and to fully use medical and other services, we need to register them with the tax authorities as taxpayers.
Of course, it would be impossible to authorize all employment activities in one day. It can be legalized step by step by explaining the issue to entrepreneurs and increasing their economic literacy. For this, public control should be robust. People should get paid according to their work. It is necessary to create conditions for legal work and expand their opportunities.
Currently, the implementation of the medical insurance system is underway; this would also allow legal employment. Legal employees can easily access medical insurance services in the future. If we create similar opportunities, employees will also try to become legally authorized to work.
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