From tax cliff to a growth path: Modernizing e-commerce taxation in Uzbekistan
Description
This policy brief examines the taxation and regulatory challenges affecting the formal development of e-commerce in Uzbekistan. Although the sector is growing rapidly, the current tax framework creates structural disincentives for firms to scale transparently within the formal economy. The brief argues that the main policy challenge is not the headline level of taxation, but the design of incentives and transition rules that shape firm behavior, business formalization, and digital transaction visibility. The analysis focuses on the simplified tax regime for e-commerce, the abrupt transition from the 3 percent turnover-based regime to the general tax regime at the UZS 1 billion threshold, and the treatment of hybrid online-offline business models. It highlights that the existing framework may encourage fragmentation, informal practices, and limited scaling among firms that would otherwise have the potential to grow within the formal economy. The brief proposes a reform package centered on raising the simplified-regime threshold from UZS 1 billion to UZS 5 billion while maintaining the 3 percent rate, reconsidering the 90 percent e-commerce income requirement, strengthening digital compliance infrastructure, and improving integration between tax administration, digital payments, platforms, logistics, and customs systems. It also links e-commerce tax reform to broader developments in bonded warehouse-based cross-border logistics, where deferred duty payments and controlled supply chains can reduce liquidity pressures and improve transparency. The brief concludes that e-commerce tax reform should be treated as part of a broader modernization agenda for Uzbekistan’s digital economy. A well-designed reform pathway can reduce barriers to formal scaling, improve fiscal visibility, support fair competition, and strengthen the long-term competitiveness of Uzbekistan’s formal e-commerce ecosystem.