The Role of Value Added Tax in the Economy: Evidence from Uzbekistan’s Fiscal System

Abstract

Value Added Tax (VAT) has become one of the most significant instruments of fiscal policy in both developed and developing economies. In Uzbekistan, VAT reforms implemented during recent years have substantially influenced budget revenues, business activities, and macroeconomic stability. The primary objective of this study is to evaluate the economic role of VAT within Uzbekistan’s fiscal framework and examine its contribution to economic growth, public revenue generation, and tax administration efficiency. The research employs a mixed-method approach that combines qualitative and quantitative analysis. Statistical data obtained from the State Tax Committee of Uzbekistan, the Ministry of Economy and Finance, and international financial institutions were analyzed using comparative, trend, and descriptive analytical methods. The study also reviews contemporary scientific literature on VAT systems and tax reforms in transition economies. Research findings indicate that VAT serves as a stable source of government revenue and contributes significantly to the financing of public expenditures. Furthermore, the digitalization of tax administration and electronic invoicing mechanisms have improved transparency and reduced tax evasion. However, the research also demonstrates that high compliance costs and administrative complexities remain major challenges for small and medium-sized enterprises.