A roundtable discussion titled “Drivers of Informality in the Food Service Sector” was held at the Center for Economic Research and Reforms, bringing together representatives of government agencies, international organizations, and the expert community.
The study was prepared in implementation of the tasks set by the President of the Republic of Uzbekistan following last August’s meeting on improving the system for combating the shadow economy. Within the identified priorities, particular emphasis was placed on shifting from predominantly enforcement-based mechanisms toward the creation of sustainable economic incentives for transparent business activity.
According to CERR estimates, the volume of hidden economic activity in Uzbekistan exceeds 120 trillion sums. The largest shares are concentrated in the services sector, agriculture, and construction.
In this context, sector-specific studies were commissioned to develop practical proposals aimed at reducing the scale of informal economic activity. The food service sector was identified as a priority area for analysis as a dynamically developing segment of the services sector characterized by a high concentration of micro and small enterprises, widespread use of cash transactions, flexible employment arrangements, and limited supply chain transparency.
Over the past 7 years, Uzbekistan’s food service sector has demonstrated strong growth. Between 2018 and 2024, output increased by 87%, outpacing overall GDP growth. The sector’s share in GDP rose from 4.4% to 5.6%, strengthening its role in employment, household consumption, tourism, and urban economic activity.
Despite this dynamic expansion, the share of the non-observed economy in the food service sector reached 87% in 2024, including 83% shadow and 4% informal activity.
In recent years, Uzbekistan has implemented a number of reforms, including the digitalization of tax administration, the introduction of online cash registers, electronic labor contracts, VAT refund mechanisms, and temporary tax incentives. Nevertheless, factors sustaining a significant share of economic activity outside formal accounting persist, including increasing tax and regulatory burdens as businesses expand.
Although simplified tax regimes and reduced social tax rates are available, exceeding turnover thresholds results in higher VAT, corporate income tax, and social contribution obligations.
Additional pressure stems from lending rates of 22–32%, the predominance of procurement from traditional markets (64%), and the limited share of transactions documented through invoices (54%).
The structure of inputs also plays a significant role: 52% of resources consist of agricultural products, of which 64% originate in the non-observed sector.
Survey results indicate the continued prevalence of partial formalization practices in employment. An estimated 17–23% of workers in food service enterprises are employed without full formal labor registration, and one in five enterprises does not fully formalize wage payments.
At the same time, 40% of entrepreneurs are unaware of existing state support measures, including corporate income tax reductions, VAT refund mechanisms, and the use of short-term electronic labor contracts.
According to the survey, 46% of employees receive their wages entirely in cash, 37% of customers do not request fiscal receipts, and cash payments and online transfers remain widely used forms of payment.
At the same time, 73% of workers would prefer formal employment, and 77% of entrepreneurs recognize the importance of operating within the formal economy. This suggests that informality is largely driven by institutional constraints rather than deliberate resistance.
CERR Public Relations Sector
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