Foreign experience with the field of tax system in tourism. Granted privileges and prospects

Otabek Azamatov     

                                                        Tashkent State University of Economics

Today, tourism is developing rapidly as an important sector of the economy. This is because statistics of developed countries shows that gains from tourism are higher than in many other sectors. Tourism is an industry that generates income through direct services, which means the industry sells only services, not products. The process of consuming the services starts from the moment provided.  Nowadays

Uzbekistan pays special attention to tourism. In particular, the reforms implemented in recent years are a clear proof of this point. For instance, the Decree PF-4861 «On measures to ensure the accelerated development of tourism in the Republic of Uzbekistan» dated December 2, 2016 was a major step in the development of the industry. For the first time in the 25-year history of independent Uzbekistan, tourism has been interpreted as a strategic direction. This effort demonstrated that the development of tourism has now reached the level of state policy. The decree also stipulates followings:

  • a system of customs control «green corridor» for foreign tourists , simplified procedures for passport and customs control, baggage retrieval will be introduced until April 1, 2017 at the international airports of Tashkent, Samarkand, Bukhara and Urgench, necessary measures to improve the quality of transport services will be taken;
  • organizing a separate passport control system of residents and non-residents at airports and railway stations;
  • convenient tourist information places at airports and railway stations will be built, the operation of tourist information points

The implementation of the above measures is aimed at ensuring that the quality of services at key transport hubs meets the most advanced world standards, and increasing the rating of international airports and railway stations in the country. Another important feature of the Decree is the further stimulation of entrepreneurial activity in the field of tourism, the development of tourism infrastructure, the provision of additional benefits and preferences to tourism organizations. In fact:

—    Tour operators are exempted from the compulsory sale of foreign exchange earnings for tourism services provided by them;

—    Hotels are obliged to sell only 25% of foreign exchange earnings in the prescribed manner;

—    Payment for hotel services by foreign citizens is made in a freely convertible currency, except for cases when payment is made by state and budgetary organizations of the republic;

—    When legal entities commission hotels and motels of at least 4 stars, they are exempt from corporate income tax, land tax and property tax, as well as a single tax payment for a period of 5 years;

—   The fee for the purchase of new vehicles with a capacity of more than 9 people by tourism entities is charged to the Republican Road Fund in the amount of up to 3%, not 20% of the maximum value of vehicles.

The decree instructed the State Committee for Tourism Development to submit the Concept of medium-term development of tourism in the Republic of Uzbekistan along with a program of specific measures to implement the Concept in 2017-2021 to the Cabinet of Ministers within 3 months. In pursuance of the decree, the President of the Republic of Uzbekistan adopted a resolution on the organization of the State Committee for Tourism Development. The resolution defines the main tasks and areas of activity of the State Committee, approves the organizational structure and Charter of the State Committee, as well as established a number of departmental organizations for the promotion of national tourism products abroad, training in tourism and certification of tourism services. The resolution defines the main tasks and areas of activity of the State Committee and it approves the organizational structure and the Charter of the State Committee. In addition, a number of departmental organizations have been established to promote national tourism products abroad, train personnel in the field of tourism and certify tourism services. Issuing this Decree will contribute to the sustainable development of the economy, restructuring and diversification, ensuring the rapid development of tourism as a strategic sector of the country’s economy, which has the potential to become a leading force in the integrated development of all regions and related sectors. Moreover, contribution to the formation of a positive image of Uzbekistan as an attractive tourist center is also important. In addition to this decree, the Presidential Decree No. PQ-2666 of the same date, the tasks set out in the Action Strategy for the five priority areas of development of the Republic of Uzbekistan for 2017-2021 and the Resolution No. PQ-3217 of 16 August 2017 Presidential Decree support efforts to improve tourism industry.

Any industry develops through legislation and government benefits. The tourism industry is also directly based on a free market, which is directly affected by global innovations and reforms in the country. Particularly, the tax system is extremely significant in the development of tourism. This is because this sector, which has just begun to improve in our country, is in need of benefits in many ways. International experience shows that the tax system has introduced various benefits for the tourism industry. In detail, EU countries have a policy whose purpose is to equalize the value added tax (VAT) for tourism and hotel activities, which is around 6-25%. In Germany and Luxembourg, for example, the average VAT rate is 15%, while In Denmark and Sweden, the maximum VAT rate is 25%. The average VAT on accommodation is 7% and can vary depending on the level of the hotel, whereas the VAT on meals (restaurant services) and car rental is up to 16% in Spain. The VAT on accommodation and meals is 8% in Greece; the government has developed a system of benefits for companies that provide travel services in off-season as well. The government of France charges the average VAT on tourism activities by 10%, including by 6% for accommodation and by 19% for catering services, whilst VAT for accommodation and meals is set at 10% in Austria. However, according to the federal law on tourist taxes, all tourist organizations pay a local fee for the accommodation of each tourist (in the community area — to the community, in the resorts — to the resort fund). Fees may vary depending on the season. Hospital patients, children under 6, schoolchildren and students exempt from these fees. Furthermore, in some European countries, tourism companies use preferential tariffs for utilities. In most cases, there is exemption for travel companies from income tax for up to 20% of their foreign exchange earnings. The governments give incentives to build new tourist facilities by selling land at low prices and leasing it for a certain period of time (Up to 99 years in Cyprus, up to 49 years in Israel and Turkey). Due to the rapid pollution of the environment, public policy in the field of tourism is increasingly focused on environmental protection in many countries. A number of countries have special commissions to oversee the planning of environmental protection in tourism (UK, France, and Scandinavian countries).

In 1992, in Rio de Janeiro, the World Tourism Organization adopted a work program for the 21st century, which 182 countries agreed with. The main authority in the running this program is given to government agencies for tourism. The plan highlights three main tools that can be used to create long-term achievements in environmental protection along with tourism. These tools are described below:

—          Development of new products or strengthening of existing measures aimed at protecting people and the environment;

—          Use of price as a mechanism of pressure;

—          Development of programs to ensure the purity of operating processes and products in the tourism industry;

Government agencies play a leading role in creating long-term tourism plans in countries like Russia, Finland, Austria, Philippines, etc. The work program for the XXI century raises the following key issues for government agencies in the field of tourism:

—          reduction of economic and other control systems in monitoring the tourism industry;

—          assessment of the impact of tourism on the economy, social and cultural life of society and the environment;

—          training personnel in the field of tourism;

—          planning long-term sustainable development of tourism;

—          exchanging information between developed and developing countries;

—          participation of all segments of society in the development of tourism;

—          creating the concept of a new product;

—          evaluation of the results of the measures taken;

—          cooperation in international operations;

The most important objectives of the program are followings:

—          to assess the performance of existing national, international and other systems focused on the development of tourism;

—         to establish cooperation between private and public sectors of tourism;

—          to take economic measures to guarantee prices for goods and services, taking into account the environmental costs associated with tourism.

In addition, taxes and fees on the tourism industry should be set in such a way that there are sufficient funds for the expansion of tourism infrastructure, environmental improvement and other purpose. Economic incentives should also be used to encourage tourism companies to succeed in protecting the environment. The secondary purpose involves assessing the impact of tourism development on the socio-economic and cultural life of the community. This, in turn, highlights the need to address issues such as water resources, electricity, and efficient use of transport, employment in tourism, the existence of a policy of local participation, protection of the environment, cultural, natural and historical values. Training and planning programs are vital in tourism. It is recommended that school ecology courses be included in school curricula. In order to train personnel theoretically and practically, it is advisable for state tourism organizations and professional tourism associations to cooperate with the private sector.

In short, our country is undergoing many effective reforms in the field of tourism. As in the above countries, the tax system of Uzbekistan provides various benefits for the tourism industry. The exemption from income tax in the first period of its operation (up to 6 months) and the exemption from various payments for up to 5 years if a four-star hotel is established are decisive steps in the development of the tourism industry. The tourism industry can achieve even higher results if a number of additional benefits are created based on the above suggestions and recommendations.

Reference list

[1] PF-4861-sonli “O’zbekiston Respublikasida turizm sohasini jadal
rivojlantirishni ta’minlash chora tadbirlari to’g’risida”gi farmon, Toshkent 2016-yil 2-dekabr, Sh.Mirziyoyev. Manbaa: ;
[2] “Turizm sohasida qo’shimcha imtiyozlar yaratildi” tahliliy maqola. 2016-yil
6-dekabr. Manbaa: ;
[3] Боголюбов В.С. Экономика туризма. Учебное пособие. — М.: Академия.
2005. – 94 -96 с;
[4] “Turizmda soliq tizimi” tahliliy maqola. Manbaa:;

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