How it is planned to compensate for the losses of the state budget for 14 trillion soums from reducing VAT to 12%

As a result of reducing the VAT rate from 15% to 12% in 2023, the state budget of Uzbekistan may lose about 14 trillion soums. The Ministry of Finance and the State Tax Committee reported that it is planned to make up for the losses by abolishing benefits and improving tax administration.

The Senate of Uzbekistan at the plenary session on December 28 approved the state budget for 2023. Due to the reduction in the value-added tax (VAT) rate from 15% to 12%, the state budget may lose almost 14 trillion soums of revenue.

The senators asked the Ministry of Finance and the State Tax Committee (before their reorganization) how they planned to make up for the losses so that the state could fully implement social programs.

Deputy Finance Minister Dilshod Sultanov said that it is planned to make up for the losses by canceling some benefits and waiving benefits that expire at the end of 2022.

In addition, it is planned to improve tax administration and expand the tax base.

“I want to cite as an example the fact that despite the reduction in the tax rate, an increase in tax revenues is expected. If you have seen the budget, then if [in 2022] we collect 52 trillion soums at a rate of 15%, then next year it will be 66 trillion soums. This is 14 trillion soums more. We have big plans for VAT next year. In our language, we call this a “tense forecast”. Based on this, the tax authorities and the State Tax Committee are provided with additional instructions in the budget for almost 9.2 trillion soums, of which 6.5 trillion soums are orders for VAT. This is included in the plan,” said the Deputy Finance Minister.

According to him, in 2023 the tax and customs committees should collect this amount by improving tax administration.

Deputy Chairman of the State Tax Committee Jahongir Abdiev added that the abolition of benefits will bring an additional 5 trillion soums to the budget.

“The remaining amount … since 2022, we have launched the Autocameral system, which is becoming a good tradition. 400 criteria are included in this system. No fines are applied to entrepreneurs, the system automatically analyzes their reports without the intervention of the tax authority. According to a preliminary analysis, 14 trillion soums have been collected to date by informing entrepreneurs, turning tax administration into a new electronic system. We plan to cover [losses] through this,” he said.

The law on the state budget for 2023 was not put up for public discussion. GDP is expected to grow by 5.3% in 2023, while inflation will be around 9.5%. More taxes will be left in the budgets of the regions, the state budget deficit will be limited to 3% of GDP.