Institute for War and Peace Reporting | Giving Voice, Driving Change

Uzbekistan: Tax Hikes Killing Off Traders

Shuttle traders face ruin owing to the huge import duties the government has slapped on the goods they bring into the country.
By Galima Bukharbaeva

Private traders are resorting to drastic action in protest against ruinously high customs duties on imported goods, which they say is destroying their livelihood.


The latest and most horrific example of these protests involved a 40-year-old private trader setting himself ablaze outside his local tax office and almost killing himself.


Murodbek Jumaniazov, from Khazarasp in the Khorezm Oblast, poured petrol over his body and set himself alight next to the tax inspection building in the Khazarasp region on November 12. The fire turned him into a human torch.


After being taken to the Khazarasp regional hospital, doctors said his body was covered with fourth-degree burns. "I can't tell you yet whether he will live or die," said Matnazar Matnazarov, a doctor at the hospital, "but his life is in serious danger."


Small private shuttle traders like Murodbek have for years made a living by buying goods in one former Soviet republic and then bringing them back by car to their home republic and selling them in local markets.


Now their livelihoods are in jeopardy after the government imposed massive rises in import duties on the products they bring into the country.


The first hike occurred in May, when a ministerial decree imposed 90 and 50 per cent customs duties on industrial goods and food products respectively. Private traders were also ordered to produce quality certificates for their goods and a cash register. Without this, tax inspectors are entitled to confiscate everything.


But in September, following an IMF recommendation and a series of protests by the traders themselves, which left markets virtually empty, the rates were then set at 70 and 40 per cent respectively. But many felt they were still too high.


In a country where salaries and living standards are declining, the traders say they cannot stay in business if they pass on the extra tax to the customer in the form of steep price rises.


They also complain that tax officials frequently demand declarations of customs payments and quality certificates for goods imported the previous year. As traders have to go through several formal procedures to register goods with the customs authorities and receive quality certificates, they often have to pay bribes to officials who otherwise cause delays.


Khaitbai Yakubov, a local human rights activist, said inspectors confiscated Murodbek Jumaniyazov's goods three times recently, which resulted in him losing about 2.5 million sums (over 2000 US dollars).


Yakubov said around 1,500 traders, including Jumaniazov, held a protest against the import duties and the abuse of power by tax officials outside the tax inspection building in the Khazarasp region of the Khorezm oblast.


"The most active protesters were arrested, including Jumaniazov," he said. "They were beaten and then released. Murodbek then returned with petrol and set himself on fire."


The government has defended the tax increases, saying action was needed to: regulate the goods that private individuals were bringing in; clamp down on illegal imports and stop the influx of poor quality products. President Islam Karimov recently spoke out against the volume of imported goods recently, saying they were draining the country's precious hard currency resources.


The traders insist the president is misinformed. They say they do not want to avoid taxes altogether, they just want them set at a reasonable level.


Meanwhile, ordinary citizens worried that they have nowhere to buy goods, as the markets are still half-empty and the prices too high, have begun travelling abroad to markets in neighbouring countries.


Many people from Tashkent have begun to visit Shymkent, in southern Kazakstan, where the wide selection of goods and low prices compensate for the expense of travelling more than 100 kilometres. In the east, in the Fergana valley, people have begun to shop in southern Kyrgyzstan, while people on the Tajik border have started to visit Tajik markets.


Ulugbek Janabaev, a customs chief in southern Kazakstan, said on November 11 that he thought 30,000-35,000 Uzbeks were visiting the region daily, netting them an extra revenue of 3.4 million US dollars in October alone.


Olesya Stepanova, a student from Tashkent, said she and her mother recently joined the exodus of shoppers heading for Shymkent. "Everything is half price and the choice is enormous, so it's a shame we don't have bazaars like that here. All my friends have gone or intend to go to Shymkent," she said.


Kazaks have started circulating sly jokes about the debt they owe the Uzbek leader for bringing so much income their way. One says that at Kazak banquets, people drink twice to President Karimov and then once to their own leader, Nursultan Nazarbaev.


"The first time we toast Karimov because he stopped currency conversion in 1996 and all investment came to Kazakstan," Kazaks say. "The second time we also toast Karimov because in 2002 he closed the markets and everyone came to Kazakstan to buy goods. The third time we toast Nazarbaev because he hasn't done either of these things."


In the meantime, Uzbek traders continue in vain to insist that the Uzbek duties are harsh and impracticable. They say the state should be helping its own people prosper, not the inhabitants of neighbouring countries.


Galima Bukharbaeva is the IWPR director in Tashkent and Kudrat Babajanov is an independent journalist in Khorezm.


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