Uzbek Businesses Tire of “Voluntary Contributions”

Uzbek Businesses Tire of “Voluntary Contributions”

Friday, 24 July, 2009
Businessmen in Uzbekistan are beginning to grumble more openly about being coerced into handing over cash to local government on a monthly basis, on top of all the taxes they have to pay.

The controversy livened up after Alisher Shaikhov, chairman of Uzbekistan’s Chamber of Commerce and Industry, told the Russian news agency Regnum on July 15, that the tax burden in the country was in line with international levels.

He was commenting on a report on the private sector’s view of the business environment in Uzbekistan, published by the International Finance Corporation, which noted that a large number of different of taxes are imposed, adding up to a large burden on companies.

Businessmen say that in reality, the taxation system falls far short of normal international practice, and official levies are compounded by the informal payments that firms are required to make. For instance, companies say local authorities often make them fork out contributions to top up municipal services, to landscape or clean up some public space, to support charity funds, and most of all to pay for public festivities.

Businesses pay these unofficial contributions via the mahallah (neighbourhood) committees, the lowest tier of local government.

“Once they’ve figured out how much the budget is short of, they collect the money,” said an economist. “The shortfall amount is divided among the businesses, with the larger companies paying more.”

The local authorities issue instructions specifying how much each businessman needs to “donate”.

Hasan, a Tashkent businessman who regularly has to make such contributions, says he is sick and tired of the never-ending squeeze for money.

Every month, for example, he sends the equivalent of 15 US dollars to the local landscaping department, and recently his company received notification from local government that staff members should contribute ten kilograms of scrap metal or the equivalent in cash.

“I’m not going to make my employees collect metal and hand it in,” said Hasan. “I got the accountants to pay 35 dollars to the local administration.”

Another businessman in the city, who gave his name as Nuriddin, says refusing to pay is not an option.

His company received notification from local government that it was to sponsor a fund for elderly people.

In general, businessmen are cagy about naming the total amounts they have to pay out. But they say it is public holidays that hit them the hardest.

“They usually collect between 700 and 1,000 dollars each for Nawruz [traditional new year] and Independence Day,” said Anvar, who has a business in Samarkand.

Anvar accepts that these unofficial payments amount to protection money that helps businesses survive.

“It’s been a long-standing practice that businesses have to pay off the state. It’s a down-payment to be left alone to work and make money,” he explained. “If we were to start arguing that we were in the right, they’d set the tax inspectors on us.”

(NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service has resumed, covering Uzbekistan and Turkmenistan.)
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