ANALYSIS OF TAX REVENUE LOSSES DUE TO THE SHADOW ECONOMY: THE CASE OF UZBEKISTAN AND FOREIGN COUNTRIES

Abstract

In countries with a large shadow economy, the tax base narrows and fiscal stability weakens.
The purpose of the study is to estimate the relationship between the shadow sector and tax revenues for
Uzbekistan and comparable countries, and to identify the conditions under which losses intensify. Repeated
cross-sectional analysis, composite-index construction, integral indicators, quantile regression, and feature
engineering were applied; robustness was checked with an instrumental-variables approach and system GMM.
In the descriptive statistics, the shadow economy share was M=29.7, SD=6.8, and the range was 18.4–41.6,
while tax revenues/GDP were M=20.8, SD=2.9, with 15.9–25.4. The share of electronic payments was M=54.0
with SD=9.4, whereas the cash share reached M=44.3 with SD=8.1. The quantile regression results showed
that as the shadow sector expands, the stability of tax revenues declines; in some specifications, p=0.014 and
p=0.006 were recorded, and the main association remained strong at p<0.05 and p<0.01 levels. Observations
with a higher share of electronic payments displayed a more stable tax base, while higher cash shares were
associated with stronger losses. The scientific contribution lies in assessing the effect of the shadow economy
through quantile, composite, and robust econometric tools at the same time, and in separating a high fiscal-risk
profile using digital indicators.