CC BY
25SCIENTIFIC PROGRESS VOLUME 2 I ISSUE 4 I 2021
ISSN: 2181-1601
THE VALUE ADDED TAX (VAT) GAP ANALYSIS: CASE STUDY OF
UZBEKISTAN
Jasurbek Yusupov
The State Tax Committee of Uzbekistan jasurbek 22@mail.ru
INTRODUCTION
The VAT gap has become important for tax administration in Uzbekistan in recent years due to increasing number of taxpayers of VAT (Graph 1). According to the amendment to the Tax code in 2018, whose turnover exceeded more than 1 billion soums, had to pay the VAT from 2019. Therefore, in 2019 number of VAT taxpayers sharply increased and reached to 76210 from 6449. Moreover, in 2020 new Tax code has been introduced and farmers and importers also became VAT taxpayers. Even though the number of taxpayers increased sharply, VAT paid by companies not changed respectively in this period (Graph 2). Moreover, VAT revenue is still being an important source of total budget in Uzbekistan (Graph 3).
Tax gap analysis provides tax administrators and policy makers, and their stakeholders, with a measure of the amount of tax revenues lost through noncompliance, avoidance, and the impact of policy choices (Figure 1).
Graph 1.
Graph 2.
Number of taxpayers
97 226
76 210
20 000 s 061 7 392 6 345 5 544 4 994 5 942 6 449
0
rr^H Pi-1 r^^l rr^H H=
\r o>
V
iV
SCIENTIFIC PROGRESS
VOLUME 2 I ISSUE 4 I 2021 ISSN: 2181-1601
PAID VAT (IN BILLION SOUMS)
25 000 23 661
20 000
15 000 13 735
8 634
10 000 ,n91 6 211 6 958
3 726 4 342 5 021 5 000 3 726
0
15 786
13 735
8 634
ii'miS
<y N? <? NÏ> N-> <? *.<?"
^ s>
Graph 3.
Share of VAT in budget (in percent)
SCIENTIFIC PROGRESS
VOLUME 2 I ISSUE 4 I 2021 ISSN: 2181-1601
Figure 1. Illustration of the Components of the Tax Gap.
ACGD = Current potential
ACHE = Reference potential
Œ £
o
n >
ai
100 percent C compliance
Current Compliance Level
T
Compliance Gap
I
\\\\\\\\\\\\\\\\\\\\\^
\\\\\\\\\\\\\\\\\\\\\ \\\\\\\\\\\\\\\\\\\\\ \\\\\\\\\\\\\\\\\\\\\
■^■Actua^revenwAv,
\\\\\\\\\\\\\\\\\\\\\ \\\\\\\\\\\\\\\\\\\\\ \\\\\\\\\\\\\\\\\\\\\
Policy Gap
G
H
F
B
A D E
Current Policy Reference Policy
Structure Structure
BACKGROUND AND SIGNIFICANCE
Finding the nature and causes of the VAT gap is also an issue on which many researchers concentrate. Understanding the factors that influence the VAT gap could potentially help in reducing it by making changes to the VAT system and adjusting VAT policy. The significance of the research is to reveal to the government real picture of the VAT gap, especially which sectors are more vulnerable to create the gap.
REVIEW OF PRIOR STUDIES AND LITERATURE
This research mostly motivated by IMF's "The Revenue Administration—Gap Analysis Program: Model and Methodology for Value-Added Tax Gap Estimation" (Hutton, 2017). Moreover, research on 24 EU Member States showed that final consumption of households and non-profit organizations in each state, with a positive impact on the VAT gap, and share of VAT in GDP, reducing the VAT gap (Zidkova, 2014). In Africa's case, research VAT gap for Uganda showed that manufactures were found to have large compliance gap (Lakuma & Sserunjogi, 2018).
IV. AIMS AND RESEARCH QUESTIONS
Because of the study of VAT gap is new frontier in the field of finance and economics, the main aim of the research is to evaluate compliance and policy gap in Uzbekistan.
Following research questions will be revealed during the study:
1. What is the compliance gap and how it is measured?
2. What is the policy gap and how it is evaluated?
SCIENTIFIC PROGRESS VOLUME 2 I ISSUE 4 I 2021
ISSN: 2181-1601
3. What are the scopes of compliance and policy gap in Uzbekistan?
4. How the results could be utilized in taxation?
As a research method of estimating VAT noncompliance, it will be used top-down approach. A top-down approach aims to provide a comprehensive assessment of all tax losses by measuring the gap as the difference between estimated potential revenue and actual revenues. The estimates for potential revenue are typically produced using statistical data. This approach does not identify the compliance behaviors creating the losses (Hutton, 2017).
IMPLICATIONS AND CONTRIBUTION TO KNOWLEDGE
This research would be the first comprehensive study of VAT gap analysis in Uzbekistan. The results could be used for evaluating VAT gap by tax administrations or for further studies. Furthermore, analysis would be done in sectoral basis, which would define the real risk in these sectors and the results could serve for investigation and audit these sectors.
REFERENCES
1. Hutton, E. (2017). The Revenue Administration-Gap Analysis Program : Model and
Methodology for Value-Added Tax Gap Estimation . INTERNATIONAL MONETARY FUND, 32.
2. Lakuma, C. P., & Sserunjogi, B. (2018). The Value Added Tax (VAT) analysis for
Uganda. Research Series: Economic Policy Research Centre (EPRC).
3. Zidkova, H. (2014). DETERMINANTS OF VAT GAP IN EU. Prague Economic
Papers, 514-530.
