The Government of Uzbekistan provides a wide range of fiscal (tax and onepager effectiveness of fiscal stimulus for mod | Page 2

Figure. There is a weak linkage between fiscal incentives and modernization results
Income tax and revenue Unified tax and the share of small business in industry
Property tax and the level of depreciation Import duties and the share of equipment in import
In order to improve the efficiency of fiscal incentives
for modernization it is recommended the following
measures.
1. It is necessary to connect tax incentives with modern-
ization results (for instance, the growth in production, sales
and export volumes). In other words it is suggested to pro-
vide conditional benefits in the form of tax credit. With the
achievement of the modernization goals a conditional tax
credit is considered paid. If at the end of the grace period
the results are not achieved, the rest amount of tax incen-
tives should be returned to the state budget.
2. All moving fixed assets (vehicles, equipment) should be
gradually withdrawn from property tax base in order to ac-
celerate technological improvement.
3. Local producers of any equipment should be exempted
from VAT like imported ones. It stimulates local producers
of equipment, creates an equal conditions for imported and
internally produced technologies. 4. It is necessary to specify the term «modernization of
production» where the all expenditures for fixed assets
(capitalized costs) should be included.
5. It is necessary to avoid the practice of providing tax in-
centives for selected companies. Instead it is suggested to
stimulate selected branches of economy or production of
selected goods.
Reduction in benefits provided to the selected companies
by 50% will bring 2.6 trln.soums in 2011 prices additional
revenue for the state budget which reduces the tax burden
to other businesses by 3.3%.
It should be noted that the fiscal stimulus of moderniza-
tion does not yield the desired results without effective
actions in monetary, exchange rate and industrial policies.
More importantly it needs improvement the quality of the
government institutions.
Center for Economic Research
5, 1 st blind alley, Shota Rustaveli str.
Tashkent 100070, Uzbekistan
Tel: [phone],
281-45-56/57/58/59;
Fax: [phone]
www.cer.uz
UNDP Country Officer in Uzbekistan
4, Taras Shevchenko str.
Tashkent 100029, Uzbekistan
Tel: [phone];
Fax: [phone]
www.undp.uz