Cement Producers See 4-Fold Tax Reduction, State Budget Loses Billions
Tax Rate on Limestone for Cement Production Reduced by 4 Times in Uzbekistan
In a surprising move, the tax rate on limestone intended for cement production in Uzbekistan was reduced by almost 4 times in 2024, despite a planned reduction of only 2 times. The government and parliament of Uzbekistan had originally set out to reduce the tax rate from 22,500 soums to 11,250 soums per ton of limestone, but the actual reduction was down to 6,000 soums per ton.
This decision was made with the intention of preventing a sharp increase in the price of cement products and increasing the competitiveness of domestic producers in front of foreign cement suppliers. However, the move has led to concern over its impact on the state budget, with projected losses of 2 trillion soums.
According to the Ministry of Economy and Finance, cement production capacity in Uzbekistan has increased by 1.8 times in recent years, from 15.1 million tons in 2019 to 26.7 million tons in 2023. With production volume, demand, and capacity for factories all expected to increase further in 2024, the government predicts that local enterprises will be able to cover 98% of the demand in the domestic market.
However, the reduction in the tax rate has sparked debate, with the Uzsanoatqurilismateriallari association claiming that the high taxes have led to increased cement prices. Economist Otabek Bakirov disputed this, citing a clear downward trend in cement prices throughout 2023.
The issue of control and ownership of major cement plants in Uzbekistan has also been raised, with most of the capacity in the country being controlled by offshore companies and Chinese investors. The reduction in taxes for cement plants is expected to result in a significant decrease in receipts to the state budget, raising concerns about the long-term impact on the economy.
This move comes after a similar trend of tax reductions for natural resources in Uzbekistan, which did not yield the expected results in terms of increased production. With both domestic and international stakeholders expressing concern and skepticism, it remains to be seen how this decision will ultimately impact the cement industry and the Uzbek economy as a whole.
