Tashkent, Uzbekistan (UzDaily.com) -- Cabinet of Ministers of Uzbekistan held a meeting dedicated to discussion on expected results of 2018 and the forecast of key macroeconomic indicators, the concept of tax and budget policy, the draft State Budget of the Republic of Uzbekistan for 2019.

At the end of 2018, revenues of the State budget are expected to increase, including through measures taken to increase the autonomy of local authorities in generating local budget revenues, increasing the taxable base, as well as measures to liberalize the foreign exchange market and reform the agricultural sector.

Exceeding the forecast parameters of the state budget revenues allowed to increase spending, mainly aimed at strengthening the material and technical base and improving the quality of education, medicine, science, culture and other areas, as well as increasing wages, pensions and benefits.

In 2018, additional funds were allocated from the republican budget to issue a credit line to commercial banks participating in the co-financing of the affordable housing program for 3.8 trillion soums. About 1.52 trillion soums have been allocated for the implementation of the state programs “Obod Qishloq” and “Obod Mahalla”, the state program “Yoshlar - kelajagimiz” - 500 billion soums, and 300 billion soums to support the newly created Public Foundation to support women and families.

Over 4.5 trillion soums were directed to realization of programmes “Obod Qishloq” and “Obod Mahalla”, improvement of cities and villages, construction, reconstruction and overhaul of preschool educational institutions, as well as formation of funds to stimulate creation of new jobs under the Council of Ministers of the Republic of Karakalpakstan, regional khokimiyats and the city of Tashkent.

The meeting thoroughly and comprehensively discussed the approaches and proposals for the formation of forecasts of the main macroeconomic indicators, the parameters of income and expenditure of the country’s budget for the coming and subsequent years.

It was noted that for the first time, starting from 2019, a mechanism of medium-term budget planning is being introduced by approving the State budget for forecast year and budget guidelines for next two years.

In 2019, it is planned to continue the implementation of measures aimed at improving fiscal policy, further improving intergovernmental relations, raising the standard of living of the population, targeting the support system for socially vulnerable groups of the population, consistent differential wage increases and other payments to the population with an impact on inflation.

In accordance with the main directions of the Concept of improvement of tax policy, approved by Decree of the President of the Republic of Uzbekistan dated 29 June 2018 No. UP-5468, started from 2019:

1) the tax burden on the wage fund is reduced by:

• introduction of a single tax rate on personal income at rate of 12 percent and the abolition of the payment of insurance premiums of citizens (8 percent of wages), which will increase the amount of wages received “on hands” by an average of 6.5 percent;
• reducing the rate of the single social payment to 12 percent of the wage fund;

2) mandatory contributions to state trust funds levied on turnover (revenue) in the amount of 3.2 percent are canceled;

3) the rates are reduced: corporate income tax from 14 percent to 12 percent, profit tax of commercial banks from 22 percent to 20 percent, tax at the source of payment of income in the form of dividends and interest — from 10 percent to 5 percent; tax on property of legal entities - from 5 to 2 percent.

As a result of the measures taken, about 10 trillion soums will remain at the disposal of economic entities and the population.

Along with the above measures, the meeting participants comprehensively reviewed proposals for improving tax policy aimed at the careful use of resources and ensuring the completeness of budget revenues, in particular, through:

• indexation of tax rates established in absolute amount (land tax, water use tax, excise tax);
• introduction of a combined excise tax on cigarettes, which provides for the use of an ad valorem rate along with a fixed rate;
• introduction in exchange for insurance contributions of citizens (in connection with their cancellation) payment of a single social payment for individual entrepreneurs and persons whose work activity is not accounting (without increasing the total amount of payments);
• introduction of minimum fixed rates in the absolute amount of tax on the use of subsoil for certain minerals (sand, limestone, crushed stone, etc.).

The expenditures of the State Budget of the Republic of Uzbekistan provide for the necessary funds for the implementation of the adopted state programs, instructions of the President of the Republic of Uzbekistan following his visits to the country’s regions, as well as social support measures for the population.

In 2019, as in previous years, the priority of spending on maintenance of the social sphere and social support of the population will remain (54 percent of the total expenditures of the State budget). In the field of wages and other payments, implementation of measures to increase wages, including the increase from 1 January 2019, is envisaged:

• to teachers and school leaders by 10 percent, and to teachers with a qualification category - differentially from 15 to 25 percent;
• low-paid public sector employees - from 5 to 15 percent.

It was noted that the proposed measure for low-paid categories of workers only in the public sector will affect more than 360 thousand people. For example, the wages of the lowest category of technical workers of budgetary organizations, excluding bonuses and allowances, will increase from 502 to 577 thousand soums.

The budget for 2019 provides funds to increase salaries for university teachers and research institutes at research institutes by 1.5 times, medical and pharmaceutical workers at public institutions by an average of 26.5 percent (this is in addition to the 20 percent increase from December 1, 2018 ). The budget also takes into account the necessary funds for a general increase in wages of public sector employees not lower than the inflation rate and an increase in budget funds for the payment of social benefits by 20 percent.

Investment costs are estimated at 11.9 trillion soums. These funds will be used to implement strategically important projects defined by decisions of the President and the Government of the Republic of Uzbekistan, including projects for the development and reconstruction of distribution networks of drinking water supply, water management facilities, construction and reconstruction of transport and communication infrastructure, as well as educational and medical-social institutions.

Special attention was paid to financing of the health sector, which will receive more than 12 trillion soums. In particular, about 1 trillion soums are allocated to finance the purchase of medicines and medical products, 661.5 billion soums to implement basic programs in the health sector, and 58 billion soums to equip medical institutions with modern diagnostic, laboratory and medical equipment.

In connection with the falling incomes of the extra-budgetary Pension Fund due to a radical reduction in the unified social payment rate, cancellation of insurance contributions of citizens and compulsory deductions, the budget expenditures include funds to cover its deficit in the amount of 4.7 trillion soums. This will ensure the timely and unconditional payment of pensions to pensioners.

The cost of credit lines to participating banks to co-finance programs for the construction of residential buildings are provided in the amount of 3 trillion soums.

In the course of the subsequent discussion, the meeting heard reports from the heads of a number of ministries and departments, as well as first deputy chairmen of the Council of Ministers of the Republic of Karakalpakstan, regional hokims and the city of Tashkent.

The heads of ministries, departments, business associations and local executive authorities were given specific tasks to increase responsibility for the targeted use of budget allocations, timeliness and completeness of budget revenues, increasing the revenue base of local budgets and the responsibility of territorial divisions of the state tax service and financial bodies for increasing the revenue base of local budgets and identifying reserves.

Following the discussion, decisions were made on the approval of the main macroeconomic indicators, the concept of tax and budget policy, the draft State Budget of the Republic of Uzbekistan for 2019 and forecast parameters for 2020-2021 and the direction to the Legislative Chamber of Oliy Majlis of the Republic of Uzbekistan.