Monday, 21, September, 2020

Lockdown measures have led to a decline in economic activity and, as a result, to a decrease in revenues to the treasury. Such a conclusion can be drawn from the commentary on the budget revenues, published by the Ministry of Finance.

According to the Ministry of Finance, the state budget revenues in the first half of 2020 topped 58.2 trillion soums. This is 7.5 trillion soums (14.8%) more than in the same period last year.

At first glance, budget revenues seem to be declining. However, if quarterly collections are analyzed, a different picture emerges. Revenues in the first quarter increased by 23.4% compared to the same period last year. If such a growth rate was maintained in the second quarter, in the first year-half the treasury would have receive about 62.6 trillion soums. Thus, based on the hypothesis of steady growth, the estimated budget losses is at about 4.4 trillion soums. The main reason for this is the sharp decline in economic activity due to the pandemic.

Factors that led to a decrease in tax revenues:

  • the pandemic affecting the economic activity of taxpayers;
  • VAT - reduction of the tax rate, which is the main part of budget revenues, and other benefits provided from the beginning of the year;
  • first of all, small business and the areas most affected by the pandemic (tourism, catering, etc.) are provided with taxes (property, land taxes) that are not related to the activity of entrepreneurs, as well as social tax and turnover tax benefits and preferences.

Factors that led to an increase in tax revenues:

  • increase in income tax and subsoil use tax revenues at the expense of mining enterprises. Tax rates have been raised for them, the order of profit tax has changed. Along with the rise in the price of precious metals, this has led to a significant increase in budget revenues;
  • part of the payers to pay general taxes for 2019, when the turnover exceeded 1 billion soums;
  • indexation and increase of resource tax rates;
  • much higher rates of tax revenue in Q1;
  • full transfer of dividends to the state budget from the net profit of state-owned enterprises in 2019;
  • transfer to the budget of 50% of the balance of funds on deposit accounts, formed at the expense of deductions from taxes, mandatory fees, duties and penalties of public authorities and administration, courts and prosecutor's offices, ministries and departments.

Main conclusions:

1. The pandemic had a serious negative impact on the financial and economic on business, which was reflected in tax revenues to the budget.

2. The measures taken by the state to some extent solved the problems arising in the activities of economic entities, allowed to avoid the catastrophic situation in the fulfillment of state budget revenues.

3. In order to support SMEs at the expense of reliefs and waivers, changes were made to the tax procedure. At the same time, the largest enterprises in the country have become the main entities that cover budget losses and provide tax revenues.

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