Cotton taxation in Uzbekistan : opportunities for reform

The Cotton Taxation in Uzbekistan study estimates in detail the major taxes and subsidies in the cotton sector over the period 2000-2004. The study estimates major explicit (or visible) and implicit (or hidden) taxes and subsidies. The study concludes that cotton is over-taxed relative to other crops, therefore creating disincentives for farmers to produce cotton relative to other crops. However the problem is more than just the level of taxation. The study argues that the current tax structure has perverse incentives which cause inefficiencies, and cotton production could be increased at no cost to the budget if input subsidies and output taxes were reduced by equivalent amounts. The study presents a reform proposal which aims to be fiscally neutral and would create a net welfare gain to Uzbekistan.

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