Fiscal Analysis Institute proposes taxing bank deposit interest at 5%

The Fiscal Analysis Institute has put forward a suggestion to levy a 5% tax on interest accrued from bank deposits. This proposition was unveiled on July 30 by Fazliddin Shamsiev, a lead specialist at the Institute for Fiscal Analysis, Tax and Customs Administration Improvement, and Reduction of the Shadow Economy, during the Fiscal Dialogue event, as reported by a Kun.uz correspondent.

The institute highlights that interest from bank deposits has enjoyed tax-exempt status since 1998, distinguishing it as one of the rare forms of passive income not subject to taxation. In contrast, dividend earnings face a 5% tax, while income from rent, royalties, and capital gains typically incur a 12% tax.

The institute advocates for the removal of this current exemption, proposing that deposit interest be taxed at the identical 5% rate applied to dividends. Implementing this change would necessitate revisions to Article 381 of the Tax Code.

To bolster their recommendation, the authors referenced global precedents. Interest income is taxed at 10% in nations such as Kazakhstan, Azerbaijan, and India; 15% in Thailand; 20% in Indonesia; 26.4% in Germany; and ranges from 15% to 40% in Turkey.

Based on the institute's projections, the introduction of a 5% tax could yield an estimated UZS 1.4 trillion in additional revenue for the state budget. This calculation is predicated on household bank deposits amounting to UZS 170.2 trillion as of May 1, 2026, an average annual interest rate of 16%, and the proposed 5% tax rate.

As an illustration, a UZS 200 million deposit held for one year at an annual interest rate of 20% would generate UZS 40 million in interest. Under the proposed tax, 5% of this sum, or UZS 2 million, would be withheld as tax.