Journal of Tax Reform
Economic Growth and Optimal Tax Burden: A Case of Uzbekistan’s Economy
Islombek M. Niyazmetov 1, Azizjon S. Rakhmonov 3, Otajon Otabekov 2
1 Banking and Finance Academy of the Republic of Uzbekistan, Tashkent, Uzbekistan
2 Westminster International University in Tashkent, Tashkent, Uzbekistan
3 KIMYO International University in Tashkent, Tashkent, Uzbekistan
Abstract
Taxes have always been the largest contributor to the government budget revenue, so it is critical to collect maximum amount of tax revenue to meet policy objectives. The revenue performance of the countries, in turn, depends primarily on optimality of tax burden in an economy and capacity of revenue agencies to levy taxes set by the law. These factors have been major issues for all countries around the world, particularly for transition economies which are on the verge of major economic transformation. Uzbekistan as one of such countries, since 2017 has implemented multiple fiscal reforms to improve the fiscal capacity of the tax system, thereby increasing economic growth. To assess to what extend current tax policies are efficient, we put forward aim of the article as to elaborate the efficiency of Uzbekistan’s tax system using tax effort index to measure collection capability of potential tax revenue and optimal tax burden to maximize economic growth. In this study, we first using mathematical model identified tax effort index for Uzbekistan, which appeared to be approximately 45%. This implies that revenue agencies of Uzbekistan failed to collect on average half of the potential tax revenue over the period 2010–2020. Furthermore, we attempted to determine the optimal tax burden using the Ordinary Least Squares (OLS) method. According to the results of the econometric analysis, the optimal level of tax burden in Uzbekistan for the years 2000–2019 is estimated to be around 19%. Targeting tax burden to this level could reduce GDP gap by 1%.
Keywords
optimal tax burden, tax effort, economic growth, fiscal policy, taxation, tax system, potential tax revenue
JEL classification
H20, H21, H26, O4References
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About Authors
Islombek M. Niyazmetov – Dr. Sci. (Econ.), Head of department of Tax policy, Banking and Finance Academy of the Republic of Uzbekistan, Tashkent, Uzbekistan (13a Abdulla Kadiry Street, Tashkent 100011, Uzbekistan); ORCID: https://orcid.org/0000-0001-8075-9938; e-mail: islambekniyazmetov2022@gmail.com
Azizjon S. Rakhmonov – M.Sc. in Economics, Department of Finance, KIMYO International University in Tashkent, Uzbekistan (156 Usman Nasyr Str, Tashkent 100121, Uzbekistan); ORCID: https://orcid.org/0000-0001-6734-9504; e-mail: azizrakhmonov1913@gmail.com
Otajon Otabekov – PhD student, Westminster International University in Tashkent, Tashkent, Uzbekistan (12 Istikbol Street, Tashkent 100047, Uzbekistan); ORCID: https://orcid.org/0000-0002-9651-318X; e-mail: otajonotabekov71@gmail.com
For citation
Niyazmetov I.M., Rakhmonov A.S., Otabekov O. Economic Growth and Optimal Tax Burden: A Case of Uzbekistan’s Economy. Journal of Tax Reform. 2023;9(1):47–63. https://doi.org/10.15826/jtr.2023.9.1.128
Article info
Received November 20, 2022; Revised January 13, 2023; Accepted February 12, 2023
DOI: https://doi.org/10.15826/jtr.2023.9.1.128
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