Ways to Improve The E-Commerce Taxation Mechanism

Abstract

The rapid growth of the digital economy has led to transformative shifts in global commerce, creating new challenges for tax systems in monitoring and regulating online transactions. In Uzbekistan, the expansion of e-commerce has prompted legislative and fiscal reforms, yet the current taxation mechanisms remain underdeveloped relative to the pace of digitalization. While several legal frameworks exist, there is a lack of a unified, transparent, and adaptive tax model tailored to the needs of e-commerce entities operating both domestically and across borders. This study aims to analyze the current legal and fiscal landscape of e-commerce taxation in Uzbekistan, evaluate international best practices, and propose a model mechanism to enhance tax administration and compliance in the digital sphere. The research reveals that Uzbekistan has introduced specific tax regimes—such as reduced tax rates and special accounts for e-commerce entities—but further improvements are required. A proposed multi-component model includes a unified electronic register, automated transaction monitoring, simplified reporting, and enhanced international cooperation. The study offers a structured taxation model rooted in the principle of "economic presence," drawing from OECD guidelines, EU VAT practices, and U.S. digital tax frameworks, while adapting them to the Uzbek context. Implementing the proposed framework would enhance tax base identification, encourage business formalization, reduce cash turnover, and increase transparency, thereby contributing to sustainable development of Uzbekistan’s digital economy.