UZBEKISTAN: Open dialogue between the President and entrepreneurs: New initiatives, benefits and preferences

Islamabad: Monitoring Desk – On August 22, 2022, President Shavkat Mirziyoyev held an open dialogue with entrepreneurs.The Head of the state briefly dwelled on the work carried out since last year’s meeting. In particular, as a result of improving the business environment over the past year, entrepreneurs built more than 55,000 business buildings.

The number of business entities with revenues of over $1 million increased by 5,000 to 26,000. Another thousand entities brought their trade turnover from $1 million to $10 million, and the revenue of 220 enterprises reached $100 million. The number of exporting enterprises amounted to 7.5 thousand, the total volume of exports increased by 30 percent.

A call center organized before the current dialogue received more than 12 thousand requests from entrepreneurs. In addition to personal or local problems, they also raised systemic issues. It was noted that analytical work would be carried out to find the most optimal solutions.

The President outlined five main areas and put forward many initiatives for each of them.

First, it was determined to introduce separate approaches to supporting enterprises by dividing them into categories.

In particular, enterprises with an annual turnover of up to 1 billion UZS will be classified as micro-businesses, up to 10 billion UZS – as small businesses, up to 100 billion UZS – as medium-sized businesses.

Based on this, from January 1, 2023, a single tax rate of 4 percent will be introduced for micro businesses instead of the current turnover tax rates of 4 percent to 25 percent.
Enterprises with an annual turnover of more than 1 billion UZS and switching to the general tax payment procedure will pay 2 times less income tax for one year. These opportunities will facilitate the activities of 370,000 entrepreneurs.

The need for increasing the number of medium-sized enterprises with high growth potential was emphasized. Several tax incentives and compensations will be established for them.
During the last year’s open dialogue, the Head of the state promised to continue the course towards reducing the tax burden on businesses. Despite the economic difficulties caused by the pandemic, a reduction in the value-added tax rate to 12 percent from January 1, 2023, has been announced.

Another relief for entrepreneurs is that from July 1 this year, the application of increased tax rates due to the non-use of an empty building or land plot has been canceled. The President announced the write-off of the debt of entrepreneurs for 2 trillion UZS, formed as a result of paying taxes at an increased rate.

The second direction is the creation of a favorable system of financing. To this end, 20 trillion UZS will be allocated for small business projects. In addition, commercial banks will attract funds from international financial organizations for these purposes.

The Entrepreneurship Fund’s opportunities to provide guarantees will be doubled. As a result, at least 15,000 entrepreneurs will be able to resolve the issue of collateral for loans.

Of course, credit is only one aspect of the problem. Business needs infrastructure and a guaranteed market. In this regard, for example, opportunities in Tashkent region and remote areas are completely different.

Therefore, in the third direction, the issue of introducing special approaches for business based on the conditions of districts and cities was considered. Starting next year, all districts and cities will be divided into 5 categories according to their conditions. They will define special regimes for taxation, subsidies, compensation for interest on loans, providing guarantees, and connecting to infrastructure.
The established amount of payment for land privatization, which is 20 times the amount of land tax, will be reduced 10 times in the city of Tashkent and regional centers, 5 times – in other regions.

The fourth direction concerns the protection of entrepreneurs’ property. It was emphasized that only the court can cancel decisions on the allocation of land and property, as well as consider the issue of seizure of property during the investigation.
The opportunity for entrepreneurs to apply to the courts will also be expanded. In particular, when applying to administrative courts, the state duty rate will be reduced by 2 times. The term for entrepreneurs to appeal the decision of the tax authorities in court will be extended from the current 1 month to 3 years.

In the fifth direction, issues of control over the activities of entrepreneurs and bringing them to justice were discussed.

First of all, a moratorium will be announced for 3 years on the introduction of new types of liability and penalties against entrepreneurs. It was noted that from next year the duplicating control functions of 26 agencies would be canceled.

The Head of the state drew attention to the receipt of many appeals about the large number and severity of fines related to tax audits.

For example, small businesses paying an average of 1 million UZS of tax per month are subject to a financial penalty of 5 million to 10 million UZS for not issuing a check alone. That is, the punishment is the same for both small businesses and large enterprises.

The President emphasized that all types of inspections should be agreed with the Business Ombudsman, and the number of fines should not exceed the amount of tax paid by the entrepreneur.

In general, the problem that has been troubling entrepreneurs working in the trade for almost 30 years will now be eliminated – that is, criminal liability for violating the rules of trade will be completely abolished.

The Minister of Justice and the Business Ombudsman were instructed to develop a draft law to reduce the time for inspections, establish a minimum threshold for financial errors and shortcomings, having studied the proposals of entrepreneurs.

The main attention was also paid to the issue of moral support for entrepreneurs. The Head of the state proposed to establish the honorary title “Honored Entrepreneur of Uzbekistan” to recognize the work of business representatives who have created many jobs, introduced innovations in their sphere, and gained respect among the people.

The need was noted for improving the activities of the Chamber of Commerce and Industry. Its tasks and powers will be expanded. In particular, it will be granted the right to submit issues to the government that are obligatory for consideration, to file lawsuits in the

Supreme Court in the interests of entrepreneurs. The Chamber of Commerce and Industry will be completely withdrawn from the subordination of the government and will become an independent defender of the interests of entrepreneurs.

To implement all the proposals made during the open dialogue, it was instructed to establish a Public Council for Entrepreneurship Support under the President.

At the end of his speech, President Shavkat Mirziyoyev once again congratulated the businessmen of the country on Entrepreneurs Day and wished them success in their activities.

“We are entering a very important and decisive stage on the path of building a New Uzbekistan. Your selfless work, innovative thinking and approach are more important today than ever, and I believe that in this regard you will set an example for representatives of all spheres”, the President said.