TURNOVER TAX OR VAT? REGIME CHOICE AND TAX BURDEN OF SMALL FIRMS IN UZBEKISTAN

Abstract

Micro-firms and small enterprises in Uzbekistan choose between a 4% turnover tax and a standard regime of 12% VAT and 15% profit tax. Using State Tax Committee data for 2023–2025, a regime-choice breakeven model, a growth decomposition and a three-model revenue forecast, this thesis reaches four conclusions. First, firms are migrating to the standard regime: the share of turnover-tax payers fell from 65.0% to 59.2%, and the effective VAT-plus-profit-tax rate of standard-regime firms (3.52% of turnover in 2025) is below the 4% turnover tax, as the model predicts for firms whose creditable purchases exceed two-thirds of turnover. Second, the tax burden is moderate and nearly proportional (about 9% of turnover), and about 80% of revenue growth came from a wider base. Third, 87% of the revenue increase came from profit-insensitive labour and property taxes. Fourth, recorded tax preferences grew by 30.8% a year to 5.2 times the taxes paid. Revenue is forecast to reach UZS 24.5 trillion in 2026 and UZS 29.2 trillion in 2028.