TAXATION OF SMALL BUSINESSES AND INDIVIDUAL ENTREPRENEURS IN UZBEKISTAN

Abstract

This thesis evaluates the simplified tax regime for small business entities in Uzbekistan, with a focus on individual entrepreneurs (IEs), over 1998–2026. Combining an institutional analysis with administrative data for 2021–2025, early post-reform data for the first quarter of 2026 and a threshold-notch model, it reaches three conclusions. First, the pre-2026 system was locked in: more than four-fifths of IEs paid a fixed tax unrelated to income, and the regime structure did not change as the IE population grew. Second, the nominal threshold lost half of its real value, while the four-fold gap in turnover-tax rates between IEs and legal entities magnifies the threshold distortion for IEs. Third, after the fixed tax was abolished, the number of active IEs rose by 8.5% in a single quarter. The 2026 reform corrects the main design flaws, but a permanent smoothing mechanism and closer alignment of rates across legal forms are still required.