The State Tax Committee provides information on tax evasion schemes popular in the construction sector

Cases in which some construction companies do not pay income tax for accomplishing their assigned project with a loss through the artificial overstatement of expenditures in reports, are occurring in Uzbekistan.  This was discussed at the round table of the State Tax Committee on violations and common schemes of tax evasion revealed during inspections of construction organizations in 2019-2022.

It is noted that with the growth of trade turnover and work performed in 2019-2022 on average by 15-20 percent per year, the average profitability of the sector decreased from 10 percent in 2021 to 3.1 percent in 2022.  Of the 20,303 companies operating in the construction industry, about 5,000 (24 percent) reported incomes below 0 percent, more than 12,000 (60 percent) reported incomes between 0 and 1 percent, and 904 (4 percent) reported incomes between 1 and 3 percent.

In addition, about 10,000 (50 percent) construction companies have one registered employee and the true number of employees is hidden.
Also, the following cases have been presented in the form of examples:

• Realization of housing objects at a price significantly below the average market price (for example, 26 apartments in a new multi-storey residential complex built by one of the construction companies in the Uchtepa district were sold for an average of 1.8 million soms each);
• Non-payment of income tax as a result of loss-making activities by artificially exaggerating expenses in the reports (for example, in the 1st quarter of 2022, the taxpayer (construction company) implemented the realization of 16 billion soms, and activity ended with a loss of 8 billion soms);
• Contribution and realization of large sums of money, buildings, and facilities, construction materials (without indication of the source) to the charter capital of construction companies by individuals (for example, the charter capital of 2 founding individuals has been replenished by 121 billion soms since the beginning of 2021.  According to the founders of the tax authorities, the official annual income amounted to 3.4 million soms);
• Concealment of the volume of work performed by not issuing electronic invoices (for example, the taxpayer's account received 78 billion soms for the work performed, but the tax reporting showed a turnover of 15 billion soms ).

According to the report of the State Tax Committee, one of the main goals of the committee is to address these issues, voluntary compliance with tax legislation, and discuss the benefits of tax reform with taxpayers.